The article on the Economist, “If the European economy is so shaky, why is the euro so strong?” by R.A is explaining why and how the value of euro is still remaining strong, even though the economy of Europe is going through many struggles. Throughout the article, it is discussed how appreciation of a currency may not always be good improvement and what negative consequences the appreciation of a currency can lead to. The article also states how the moves of the exchange rates cannot easily be explained and goes into further details about the euro exchange rates.
The article starts by stating that recently the euro zone has been facing a good trend of improvement in terms of economy and managed to pull out of the recession. In the euro zone, the unemployment is decreasing and worries regarding the crises are disappearing by the time. However, there is the fear of deflation. As the article continues, it explains how appreciation of a currency can cause problems that are very significant and serious.
In order to better explain this point, an example of the US cars is given in the article; if US dollar appreciates compared to euro or yen while the price of the cars do not vary, it will be more expensive for the countries that uses euro or yen as their currencies to purchase US cars. As a result of this appreciation in the value of dollars, the number of cars exported will decrease in the United States. This is exactly the same reason why Europe has a fear for a strong currency; the strong euro currency makes European goods and services more expensive to other nations and thus, lowers the amount sold abroad. Also, since the households, firms and government is cutting back, the development and growth of the economy is highly dep...
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...s products and services in demand throughout the globe, hence the euro's strength, at least as determined by the "demand" side of the equation. The "supply" side of the equation would involve to what degree the European Central Bank is pushing credit expansion, which tends to push the value of the euro downwards.
In addition to this, the article uses some expressions that does not sound very right when thinking about a big economy as Europe; for example, it is mentioned in the end of the article that, “The surest way to bring it down is to make more euros”. European system certainly has a slow, hardly predictable response time, many variables, and its behavior is definitely nonlinear. Thus, using such a simple and straight forward expression regarding the exchange rate of euros may not be very right thing to do, even though it is a correct statement to some extent.
The European Union has been helped economically ever since World War II. Right after World War II’s end, Europe was struggling to hold on. The countries of the modern-day European Union thought it would be a good idea to come together and help each others struggling economy. To this day, this decision has had a very positive outcome on the EU’s economy. As shown in Diagram 1, the European Union combined together has the world’s highest GDP at 18.3 Trillion USD as compared to the United States’ 17.4 Trillion USD GDP and China’s 10.4 Trillion USD GDP. The idea
Thus, imports of American goods are under less competitive pressure to keep prices low. Thus, weak dollar benefits U.S. exports by making American goods cheaper in foreign countries. Foreign tourists can afford to travel and visit the United States. When the dollar is falling, foreign purchasing power is increasing. Purchasing power is the amount of value of a good or service compared to the amount that you paid.
The European Union today is a political and economic entity that controls in a single market located mostly in Europe exploiting Euro as a single currency uniting the vast majority of its members. The market that all European Union members share provides free trade of goods and services as well as a common external tariff. One might argue that the European Union would not perceptible its current influence had it not been for the introduction of the Euro. Speaking of the benefits of the Euro, one can name the elimination of exchange rate problems, creation of a single financial market, providing price stability, low interest rates as well as being a political symbol of unity and commitment to the Union. Today, Euro is the second reserve currency in the entire world - a fact that clearly speaks for itself of its value in the global market.
To start with, what is the meaning of the Single Market? According to European Commission website, Single Market indicates the EU as one territory that has no internal borders or any other controlling complications that lead to the free movement of booth services and goods (The European Single Market - European Commission, 2017). According to the same source, single market has great benefits. It encourages competition and trade, increases efficiency, promotes quality, as well as helps in cutting the prices. In addition, the same source considers the European Single Market as one of the EU’s ultimate accomplishments that powered the economic growth and made the everyday life of European businesses and consumers easier (The European Single Market - European Commission, 2017).
To most people in the United States hearing the word Euro brings about blank stares. Ask this same question in England or another European country and it means bringing Europe together under one common currency. The Euro can be defined as the common monetary system by which the participating members of the European Community will trade. Eleven countries Germany, France, Spain, Portugal, Ireland, Austria, the Netherlands, Belgium, Luxembourg, Finland and Italy will comprise the European Economic Monetary Union that will set a side their national currency and adopt the Euro in 2002. A new National bank, based in Frankfurt Germany, will be constructed and the interest rates that control the economies of these nations will be in the hands of this new system. It is indeed a great experiment, being masterminded in Frankfurt, one that will be felt through out Europe as well as the rest of the world.1
The recent global financial crisis that affected not only America but also Europe and other parts of the world resulted in massive unemployment. This is due to the high costs of operation that many corporations faced forcing them to cut on labor costs. There is need for European government interventions to avert this social crisis and prevent the occurrence of such a crisis in future. Unemployment has hit the service sector harder than other sectors with the following being the most affected: automotive, construction, tourism, finance and real estate. The global financial crisis has also increased consumer prices thus pushing inflation. According to McCathie, “the increase in July consumer prices to 1.7 per cent pushed inflation in the currency bloc up towards the European Central Bank’s target of keeping inflation at below, but close to 2 per cent. Eurozone consumer prices had stood at 1.4 per cent in June” (McCathie, 2010).
The value of the US dollar relevant to other currencies is a major consideration for the Federal Reserve. If they prevent large changes in the value of the dollar, firms and individuals can comfortably plan ahead to purchase or sell goods abroad.
"Europe must prevent Greece from becoming an out-and-out catastrophe and make sure that the same fiscal 'remedy' is not applied to other weak economies" -- MEP, Franziska Brantner.
Economic risk is another type of exchange risks companies have to consider when dealing globally. Changes in exchange rates are bound to affect the relative prices on imports and exports, and that will again affect the competitiveness of a company. An UK exporter dealing with companies in the US would not want the US$ to depreciate, because it would make the exports more expensive for the US market, thus the company will loose business.
Eurozone crisis has had huge impacts not only on the economy of the UE but also on the other countries who have economic and financial relations with the members of the union. The reason why we have decided to examine the Eurozone crisis in detail is to have a better understanding of the mechanisms behind this extremely important and complex problem and also to make accurate inferences about the solution alternatives. In our pape...
believe that the USD will depreciate against EUR and think that it can bear the risk of appreciation
The first reason is the issue of euro. Considering a strong correlation between money and collective national identity, money can be used as an effective tool in facilitating the integration of diverse identities (Risse, 2003). Actually, the principal goal of the issues of euro is to promote the unification of the monetary system and foster integration of the economy in order to ease economic activities betwee...
Following the trend of economy, it is important to investors to understand that strong economy creates strong stock market. To elaborate further, as stock prices are increased by current and future expectations of earnings, thus without a strong economy it would be difficult for the companies to increase and sustain their earnings (Kong 2013). The economy development is usually calculated using the gross domestic product of a countries. On the other hand, a change is the stock price can also cause a major impact to the consumers and investors directly. Hence, a loss in confidence by investors can cause a downturn in consumer spending in the long term, which will also affect the economy’s output (Aysen 2011). The graph below shows the relationship of stock market price (KLCI) and the GDP of Malaysia in 2009. Thus, it can be concluded that the economy and the stock market has a positive relationship.
The macroeconomic environment is a dynamic environment, which could not remain unchanged (Gajewsky 2015). There are many factors influence the global macroeconomic environment, such as interest rate, exchange rate, GDP，aggregate demand, monetary policy and other macroeconomic variable (Oxelheim and Wihlborg 2008). These factors are closely associated with commodity price.
When I took the scores of macroeconomics I thought I was going to get the same old spiel of how the economy works. Little did I know I will discuss economics and going to Depth and he and other economical situations will be brought up in resolved