BIRTH OF EURO AND ITS

IMPACT ON
INTERNATIONAL TRADE
 Evolution of the
European Union

European Steel
and Coal
community
Rome Treaty
creating EEC
Maastricht Treaty
creating EU
Formation of the EU
TREATIES TIMELINE
Formation of the EMU
CRITERIA TO JOIN EMU
STABILITY GROWTH PACT
BIRTH OF EURO

3 stages of EMU

Currency of EMU
WHY WAS THE EURO INTRODUCED?
 Administration

istered by the Frankfurt-based European Central Bank (ECB) and the Eurosystem (comp
 COINS
vided into 100 cents (sometimes referred to as euro-cents, especially when distinguishing

0c, 10c, 5c, 2c, and 1c denominations

BANK NOTES
DIRECT AND INDIRECT USAGE
DIRECT USAGE

16 Member States of
the European Union use
the euro as their
currency
Belgium, Germany, Ireland,
Greece, Spain, France,
Italy, Cyprus, Luxembourg,
Malta, The Netherlands,
Austria, Portugal, Slovenia,
Slovakia, Finland

Non - participants
Bulgaria, Czech Republic,
Denmark, Estonia, Latvia,
Lithuania, Hungary, Poland,
Romania, Sweden and the
United Kingdom
DIRECT AND INDIRECT USAGE
INDIRECT USAGE
THE EURO IN GLOBAL
MARKETS
International Trade
Derivatives Market
OTC Interest rate Derivatives
Debt Securities Market
Foreign Exchange Reserve
Disclosed Currency Composition
Stability of Exchange rates
Share in International Debt Market
Narrow and Global Measure
Narrow: Only Offshore
Global: Both Domestic as well as Offshore
Constant as well as Current rate
Observation
Share of the euro remained relatively stable
From 27% in 1999 to 30% in 2009 ( Global
Measure)
Share in Global Foreign Exchange
Reserves
IMF’s Currency Composition of Official
Foreign Exchange Reserves (COFER)
database
 (COFER is an IMF database that keeps end-of-period
quarterly data on the currency composition of
official foreign exchange reserves)
Reserve buffers may have been useful in
many vulnerable emerging market
countries during the crisis.
Analysis
Share of Undisclosed reserves, which
include Currencies of China, Australia,
India etc…
Drastic fall in reserves of US$, but the
undisclosed reserves can be in form of
US$
Also due to depreciation of US$
Also the rise in EURO could be because of
Depreciation of US$.
Share in International Derivatives
Source: BIS Quarterly Review:
Exchange Rates

Source: Oanda.com
Source: Oanda.com
Analysis
1999-2002: Depreciation in Euro
higher growth rate of money in the EU
higher rate of capital accumulation
higher interest rates in the US
Post 2002: Appreciation in Euro
coins were finally withdrawn from use
Euro as medium of exchange, Store of value
International Use of Euro

1

80
Factors that suits a currency for
international currency status
T a b le 1 :
Continued…
PRESENTED BY:
Aaakriti Kakkar (91001)
Aditi Bindlish (91003)

Ankit Gupta (91006)

Madhusudan Partani (91029)

Pragati Saraf (91040)