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Analysis Of Fiscal, Monetary, And Exchange Rate Articles

1195 words - 5 pages

Background and Data:
The euro (€) is the official currency of the Eurozone, which consists of 17 EU member states using this currency. The euro is also the 2nd largest reserve currency as well as the 2nd most traded currency in the world after the United States dollar. As of November 2013, with more than €951 billion in circulation, the euro has the highest combined value of banknotes and coins in circulation in the world, having surpassed the U.S. dollar.
The US dollar ($) is the official currency of the United States and its overseas territories. Just like the euro there are other currencies pegged to it, such as the Bermudian Dollar. The US dollar is the fiat currency most used in ...view middle of the document...

Business lending was still insufficient though. The central bank also said that anything they have implemented could be reversed, they have a built in exit. Meaning that if the central bank needs to fix something, they can easily do it, but they have not been faced with this yet.
Likewise, the facts about the Euro helped boost its value compared to other types of money. For example the value of the Euro is much higher than its previous value when compared to the Pound, which is Britain’s type of money.
However, the value of the US Dollar continued to stay about the same against other types of money such as the Yen, which is the type of money used in Japan. This is because countries started to collect more safe types of moneys due to the disagreement between Russia and the Ukraine.

Economists’ Synopsis of Article:
The European central bank stated that there appeared to be no signs of deflation of the Euro leading to the value of the Euro to increase compared to the value of the US dollar, which instead declined. This is the lowest the US Dollar/ Euro exchange rate has been for the past 2.5 years. Even though the Euro doesn’t appear to be deflating anytime soon, deflation is still a risk.
During a conference in Germany it was stated that there were fail-safe procedures in place at the central bank to counteract deflation if the need should arise. The central bank also stated that there was no need for additional liquidity injection measures but the demand for business lending could be higher.
Additionally, the demand for the Euro is at the highest level it has been for the year compared to the Pound. Also the US Dollar has fluctuated against other currencies as the conflict between Russia and the Ukraine has caused countries to stockpile reliable and secure store of value currencies, such as the US Dollar.

Critique of Article:
This article clearly states that the Euro is stronger then it has been in awhile compared to the US dollar. There are no signs of deflation in the near future and there are safety measures out into place to make sure the Euro faces no problems. For such a short article there is a lot of interesting/ important information concerning the Euro’s valuation.
On the other hand, there is not much information on the US dollar. The writer provides no reasons of why the dollar value had declined against the euro other than the fact that this change in value between the two was...

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