Systemic EMU (1)

Systemic EMU (1) - by the decline of the dollar o BUT still...

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Conference Monday, March 28, 2011 Systemic Level Concerns Germany’s Role in European Monetary Union Textbook - Downfall of the Dollar o Experts predict downfall of dollar out of the key currency role - Asset holders move away from dollar, switch to other currencies - European currencies more attractive, especially the Deutschemark (DM) - Germany wants to spread pressures created by the dollar’s decline o Wanted to have people switch to currencies other than the DM - Other countries want Germany’s credibility in monetary affairs, but without the stringent policy restrictions that occur with that credibility o E.g. reduced domestic economic independence, reduced ability to stimulate domestic economy, and strict levels of inflation - Main challenge for the Germans: o Create a zone of monetary stability in Europe and diffuse pressures created
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Unformatted text preview: by the decline of the dollar o BUT, still maintain independence in their own monetary affairs Henning Article-Basis hypothesis: US dominance in the economic sphere causes instability, European countries will react by integrating their monetary policy.-“When a large state produces instability in the international monetary system, smaller countries that have achieved substantial integration of markets on a regional basis will launch initiatives for a regional monetary integration as well.”-US stability causes Euro countries to lean towards the US dominated system-US instability or shocks causes further European monetary integration o Charts below provide a helpful representation of those effects...
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Systemic EMU (1) - by the decline of the dollar o BUT still...

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