The Impact of the Euro Since Its Launch Dissertation

The Impact of the Euro Since Its Launch - Dissertation Example The Euro is one of the stable currencies in the world. It is the official currency of the eurozone which consists of 17 member states of the European Union. The euro was introduced as an accounting currency on 1 January 1999. The notes and coins for the euro were brought into circulation on 1 January 2002. In the period between the introduction of the currency and the advent of its notes and coins, the preceding currencies’ notes and coins were accepted, however such currencies were fixed against the euro. The significance of the currency on a global scale can be determined by the fact that it has become second largest reserve currency in the world. Apart from that, it has also become second most traded currency all over the world after the US $. According to the statistics released by European Union, more than â‚ ¬800 billion were in circulation as at June 2010. The euro has surpassed US$ in the combined value of notes and coins in circulation all over the world. According to the estimates released by IMF, eurozone is the second largest economy in the world. Many US economists had criticized the idea of a currency such as euro. According to such economists, euro was bound to be a failure and it would not last for so long. However, euro surpassed everyone’s expectations and in a very short period of time, it evolved to be one of the most powerful currencies in the world. Most economists were against the idea of monetary unification however the success of euro proves that mone tary unification is an evolutionary process. ... However, euro surpassed everyone’s expectations and in a very short period of time, it evolved to be one of the most powerful currencies in the world. Most economists were against the idea of monetary unification however the success of euro proves that monetary unification is an evolutionary process. From these facts and figures, it can be inferred that euro has become one of the most powerful currencies in the world and it has significant impact on the global economy. 2. Euro as Reserve Currency In order for a currency to be a favoured reserve currency, it must have well developed financial markets. The euro was formed after the unification of 17 currencies of the member states of the European Union. The unification strengthened the euro financial markets and it lowered the macro-economic risks of the countries in eurozone. This was one of the reasons why euro became one of the biggest reserve currencies all around the world. It inherited its reserve status from the currencie s that dissolved into euro. Before the introduction of euro the overall share of US$ as reserve currency was 70.9% which dropped to 64% in the year 2008. On the other hand, the inherited proportion of the euro as reserve currency was 17.9% in the year in which it was introduced, i.e., 1998. One of the reasons behind the euro’s status of one of the most reserve currencies is due to German Mark. The proportion of euro as reserve currency increased to 26.5% in the year 2008. The euro has significantly affected the status of US$ as a reserve currency. Most economists are also debating the possibility of the euro replacing the US$ as the most held reserve currency. According to David