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BIRTH OF EURO AND ITSIMPACT ON

INTERNATIONAL TRADE

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European Steel

and Coalcommunity

Rome Treatycreating EEC

Maastricht Treaty

creating EU

v olut ion o f thevol ut ion o f theu rop ean Un io nur ope an Un io n

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ormation of the EU

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REATIES TIMELINE

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ormation of the EMU

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RITERIA TO JOIN EMU

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TABILITY GROWTH PACT

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IRTH OF EURO

3 stages of EMU3 stages of EMU

Currency of EMUCurrency of EMU

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HY WAS THE EURO INTRODUCED?

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Administration

istered by the Frankfurt-based European Central Bank (ECB) and the Eurosystem (com

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COINSided into 100 cents (sometimes referred to as euro-cents, especially when distinguishing

c, 10c, 5c, 2c, and 1c denominations

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ANK NOTES

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IRECT AND INDIRECT USAGE6 Member States ofhe European Union usehe euro as theircurrency

, , ,Belgium Germany Ireland

, , ,Greece Spain France, , ,Italy Cyprus Luxembourg, ,Malta The Netherlands

, , ,Austria Portugal Slovenia,Slovakia Finland

-on participants, ,Bulgaria Czech Republic, , ,Denmark Estonia Latvia, , ,Lithuania Hungary Poland

,Romania Sweden and theUnited Kingdom

IRECT USAGE

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IRECT AND INDIRECT USAGENDIRECT USAGE

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THE EURO IN GLOBALMARKETS

International TradeDerivatives Market

OTC Interest rate Derivatives

Debt Securities MarketForeign Exchange Reserve

Disclosed Currency Composition

Stability of Exchange rates

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Share in International Debt Market

Narrow and Global MeasureNarrow: Only Offshore

Global: Both Domestic as well as Offshore

Constant as well as Current rate

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Observation

Share of the euro remained relatively stableFrom 27% in 1999 to 30% in 2009 ( Global

Measure)

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Share in Global Foreign ExchangeReserves

IMFs Currency Composition of OfficialForeign Exchange Reserves (COFER)database (COFER is an IMF database that keeps end-of-period

quarterly data on the currency composition ofofficial foreign exchange reserves)

Reserve buffers may have been useful inmany vulnerable emerging market

countries during the crisis.

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Analysis

Share of Undisclosed reserves, whichinclude Currencies of China, Australia,India etc

Drastic fall in reserves of US$, but theundisclosed reserves can be in form ofUS$Also due to depreciation of US$

Also the rise in EURO could be because ofDepreciation of US$.

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Share in International Derivatives

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: :Source BIS Quarterly Review'

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Exchange Rates

Source: Oanda.com

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Source: Oanda.com

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Analysis

1999-2002: Depreciation in Eurohigher growth rate of money in the EU

higher rate of capital accumulation

higher interest rates in the US

Post 2002: Appreciation in Eurocoins were finally withdrawn from use

Euro as medium of exchange, Store of value

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International Use of Euro

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1

8

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Factors that suits a currency forinternational currency status

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T a b l e 1 :

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Continued

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PRESENTED BY:Aaakriti Kakkar (91001)Aditi Bindlish (91003)Ankit Gupta (91006)Madhusudan Partani (91029)