International Financial Management for North America
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Your firm is expanding into Europe and your department head has asked you to put together a report on Monetary Unions in general, discussing the advantages and disadvantages relative to a nation maintaining its own individual currency. Then discuss the EMU and euro in detail, including its history, the countries involved, its implementation, and how it has functioned over the last decade, noting any issues that had to be overcome. How did the International Monetary Fund (IMF) reassign the Special Drawing Rights (SDR) as a result of changing from several European currencies to the euro? Discuss whether the EMU helped or hindered the development of the European Union? Conclude the report with a brief discussion on the possible advantages and disadvantages of the Amero a possible common currency for Canada, Mexico, and the United States, that has come up in the press from time to time. Discuss why you would favor, or be against, a common currency for North America.
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Your firm is expanding into Europe and your department head has asked you to put together a report on Monetary Unions in general, discussing the advantages and disadvantages relative to a nation maintaining its own individual currency.
The monetary unions bring great advantage in trade and commerce between the countries that have the monetary union. The need and the cost of currency conversion between the countries in the monetary union is removed. There is now no need to hedge against fluctuating currency rates and this improves trade and commerce.
The disadvantage of entering a Monetary Union is the members are not directly able to control exchange rate and money supply. Further, those countries that are members of a monetary union cannot print currency and increase the spending of the government.
Then discuss the EMU and euro in detail, including its history, the countries involved, its implementation, and how it has functioned over the last decade, noting any issues that had to be overcome.
The EMU is the creation of the Maastricht Treaty that happened in 1992. The Economic and Monetary Union has been responsible for creating the euro. The euro is the single currency for Europe. The fixing of the conversion rate for eleven countries is the starting point of the euro. The euro is supported by the Stability and Growth Pact that disallows participants from unfettered expansion of their fiscal policies. The countries are not allowed to set their monetary policies. Most importantly, there are some systematic weaknesses of the Euro that is it is not shielded from economic shocks. However, there are several developments that occurred over the last ten years. The ECB has succeeded in keeping inflation under check. Further, financing in European ...
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