The Euro vs. the Dollar

Paper Summary:

The paper discusses the Euro vis-a-vis its impact on U.S. monetary and financial policy. The paper reveals that the Euro is currently performing well on the open currency markets and its strength versus the dollar is strong. The paper discusses how U.S. monetary policy, as guided by the Federal Reserve, has been forced to adjust its policy to accommodate the stronger Euro and its impact on trade and foreign relations.

Outline:
Abstract
Overview
U.S. Economic Policy
Exchange Rate Effects
Conclusion

From the Paper:

"In spite of its weak introduction, the Euro has become a major international currency on a par with the U.S. dollar, the British pound, and the Japanese Yen. The concept of a unified European currency has its origins in post World-War II Europe that was severely damaged, both economically and socially, by the ravages of the German war machine as well as the various political tyrannies that had led up to the war (Harrop, 1999). The Euro as a model of single-currency for the European Union was largely formalized in the Maastricht treaty of 1992 where the European Union became a reality rather than a pipedream (Harrop, 1999). The Euro was the conception of the 12 original European member states and was spear-headed by the Council of the European Union and the European Commission that set the formula for deciding the conversion rates at implementation (Pomfret, 2005). While initially weak on the open currency markets, the Euro quickly established itself as viable common currency regime for the EU and it has become a factor in many world economies and especially that of the U.S. economy."

Sample of Sources Used:

• Bernanke, B. (2006). Testimony of Chairman Ben S. Bernanke. Federal Reserve (online). Retrieved November 9, 2006 from: http://www.federalreserve.gov/boarddocs/hh/2006/ february/testimony.htm
• Gavin, W. (2005). Recent developments in monetary macroeconomics and U.S. dollar policy. The Federal Reserve Bank of St. Louis.
• Hairault, J. & Sopraseuth, T. (Eds.). (2003). Exchange Rate Dynamics: A New Open Economy Macroeconomics Perspective. New York: Routledge.
• Harrop, Jeffrey. (1998). 2 The EU and national macroeconomic policy. The European Union and National Macroeconomic Policy. Eds. James Forder and Anand Menon. London: Routledge, 1998.
• Mundell, R. (2003). The Significance of the Euro in the International Monetary System. American Economist, 47(2), 27+.

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