Author Question: Why did the EU countries move away from the EMS toward the goal of a single shared currency? What ... (Read 34 times)

rachel9

  • Sr. Member
  • ****
  • Posts: 495
Why did the EU countries move away from the EMS toward the goal of a single shared currency?
 
  What will be an ideal response?

Question 2

No central bank can be indifferent to its currency's value in the foreign exchange market. Discuss.
 
  What will be an ideal response?



epscape

  • Sr. Member
  • ****
  • Posts: 335
Answer to Question 1

(1 ) To produce a greater degree of European market integration by removing the threat of EMS currency realignments.
(2 ) Reduce German dominance of the EMS monetary policy.
(3 ) Given the move to complete freedom of capital movements within the EU, fixed but adjustable currency parities, may lead to ferociously speculative attacks, as in 1992-1993.
(4 ) To guarantee the political stability of Europe.

Answer to Question 2

 despite the Monetary Policy Autonomy theory of the original supporters of floating exchange rates
 exchange rate's role in inflation
 prices are sticky in the short run, so foreign developments can affect real interest rates and real exchange rates at home
 don't want their exchange rate to be too volatile as it affects the demand for their domestic products
 appreciation or depreciation can cause inflation that is difficult to counter
 banks intervene on a discretionary basis so it is still necessary for them to continue to hold foreign reserves
 dirty floats stabilize output and price level after shocks that affect exchange rates
 empirically: after 1973 countries have continued to intervene to affect exchange rates



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question


 

Did you know?

The human body's pharmacokinetics are quite varied. Our hair holds onto drugs longer than our urine, blood, or saliva. For example, alcohol can be detected in the hair for up to 90 days after it was consumed. The same is true for marijuana, cocaine, ecstasy, heroin, methamphetamine, and nicotine.

Did you know?

When Gabriel Fahrenheit invented the first mercury thermometer, he called "zero degrees" the lowest temperature he was able to attain with a mixture of ice and salt. For the upper point of his scale, he used 96°, which he measured as normal human body temperature (we know it to be 98.6° today because of more accurate thermometers).

Did you know?

Tobacco depletes the body of vitamins A, C, and E, which can result in any of the following: dry hair, dry skin, dry eyes, poor growth, night blindness, abscesses, insomnia, fatigue, reproductive system problems, sinusitis, pneumonia, frequent respiratory problems, skin disorders, weight loss, rickets, osteomalacia, nervousness, muscle spasms, leg cramps, extremity numbness, bone malformations, decayed teeth, difficulty in walking, irritability, restlessness, profuse sweating, increased uric acid (gout), joint damage, damaged red blood cells, destruction of nerves, infertility, miscarriage, and many types of cancer.

Did you know?

In the ancient and medieval periods, dysentery killed about ? of all babies before they reach 12 months of age. The disease was transferred through contaminated drinking water, because there was no way to adequately dispose of sewage, which contaminated the water.

Did you know?

In the United States, there is a birth every 8 seconds, according to the U.S. Census Bureau's Population Clock.

For a complete list of videos, visit our video library