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Eu Monetary Policy And Turkey Essay

9387 words - 38 pages

TABLE OF CONTENTSiLIST OF TABLES 1INTRODUCTION 31. HISTORICAL EVOLUTION OF THE EUROPEAN ECONOMIC AND MONETARY UNION 31.1. A Brief History of European Economic and Monetary Integration 41.1.1. European Payments Union (EPU) 51.1.2. Three European Communities 71.1.3. Collapse of the Bretton Woods System 91.1.4. The European Monetary System (EMS) 121.1.5 The Dellors Report 131.2. The Maastricht Treaty 161.2.1. The Convergence Criteria and Budgetary Discipline 192. MONETARY POLICY STRATEGY OF THE EMU 192.1. Open Market Operations 202.2. Standing Facilities 202.3. Minimum Reserve System 212.4. Key Interest Rates 223. MONETARY POLICY IN TURKEY 223.1. 1980 Stabilization Program 233.2. 1994 Stabilization Program and the 16th Standby Agreement 253.3. 1998 IMF Staff Monitoring Programme 253.4. 1999 Program and the 17th Standby Agreement 273.5. Pre-crisis economic situation in Turkey 293.5. Economic Crisis of 2000-2001 303.6. Strengthening the Turkish Economy and the 18th Standby Agreement 333.7. Inflation Targeting Strategy and the 19th Standby Agreement 35CONCLUSION LIST OF TABLES20Table 1 Conversion Rates between the Euro and the Euro Area Countries 23Table 2 Monetary Policy Strategies 33Table 3 Inflation Rates and Growth Rates 35Table 4 Main Fiscal Indicators, % of the GNP INTRODUCTIONThe European Economic and Monetary Union (EMU) represents a unique experience in history. The Stability and Growth Pact (SGP) and the monetary policy strategy, which form the macroeconomic policy framework of the EMU, create new economic problems required to be analyzed.By the start of the EMU on 1 January 1999, eleven European Union (EU) countries launched a common currency, the euro. Greece joined the euro area in January 2001. The euro notes and coins replaced the national currencies on 1 January 2002, while each country started to withdraw national currency notes and coins from circulation. The national currencies of the participating countries were completely replaced by the euro at the end of February 2002. On 1 January 2007, Slovenia joined the EMU. Participation countries irrevocably fixed the exchange rates of their currencies. They also adopted a common monetary policy, which is conducted by the European Central Bank (ECB). The primary objective of the ECB was defined by the Maastricht Treaty of 1992 as maintenance of price stability. In order to realize such an objective, the Governing Council of the ECB announced the main elements of its stability-oriented monetary policy strategy in October 1998. The ECB has conducted the monetary policy in the EMU since the start of the EMU in 1999.Despite the fact that there is no common fiscal policy in the EU, national fiscal policies are coordinated at a fiscal framework in the EMU. This framework has been gradually developed. The Treaty of Maastricht set the convergence criteria, which also contain fiscal rules, for joining the EMU. The SGP, which was established by the Amsterdam European Council in 1997 to support the...

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