Lecture 9 International Finance ECON 243 Summer

Lecture 9 International Finance ECON 243 – Summer I, 2005 Prof. Steve Cunningham

Exchange Rate Policy 2

Five Major Issues in Choosing 3

Shocks 4

Shocks (Overview) 5

Choosing an Exchange Rate Regime: Internal Shocks 6

Choosing an Exchange Rate Regime: Internal Shocks (2) 7

Choosing an Exchange Rate Regime: Internal Shocks (3) 8

Choosing an Exchange Rate Regime: External Shocks 9

Choosing an Exchange Rate Regime: External Shocks (2) 10

Choosing an Exchange Rate Regime: Domestic Policy Effectiveness 11

Choosing an Exchange Rate Regime: Goals, Priorities, and Policies 12

Choosing an Exchange Rate Regime: Goals, Priorities, and Policies (2) 13

Choosing an Exchange Rate Regime: Goals, Priorities, and Policies (3) 14

Choosing an Exchange Rate Regime: Goals, Priorities, and Policies (4) 15

Choosing an Exchange Rate Regime: Inflation 16

Choosing an Exchange Rate Regime: Inflation (2) 17

Choosing an Exchange Rate Regime: Inflation (3) 18

Choosing an Exchange Rate Regime: Exchange Rate Volatility 19

Choosing an Exchange Rate Regime: Exchange Rate Volatility (2) 20

Choosing an Exchange Rate Regime: Exchange Rate Volatility (3) 21

Extreme Fixes: Currency Boards 22

Extreme Fixes: Currency Boards (2) 23

Extreme Fixes: Currency Boards (3) 24

Extreme Fixes: Dollarization 25

Extreme Fixes: Dollarization (2) 26

Extreme Fixes: Dollarization (3) 27

Precursors to the EU • Benelux (1944): Belgium, Netherlands, and Luxembourg established a customs union. • May, 1952: the six-nation European Coal and Steel Community (ECSC) was created. (The Benelux nations with Germany, France, and Italy. ) • March 1957: The Treaty of Rome established the European Economic Community (EEC) and the European Atomic Energy Commission (Euratom). 28

Objectives of the EEC 29

More History 30

Second Treaty of Rome 31

Treaty of Maastricht 32

European Monetary Union (EMU) 33

Convergence Criteria 34

European Monetary Union 35

European Monetary Union 36

European Central Bank (ECB) 37

Floating the Euro 38

European Union 39