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Euro Integration Reserve Currency?

In: Managing Structural Changes - Trends and Requirements

Author

Listed:
  • Ana Filipa Dias

    (Faculty of Economics, University of Coimbra)

  • António Portugal Duarte

    (Faculty of Economics, University of Coimbra, Portugal and EMF - Grupo de Estudos Monetários e Financeiros, Faculty of Economics, University of Coimbra)

Abstract

Since its creation, the euro has raised high expectations among the investors and within the countries that chose to adopt it. This chapter aims to study the possibility of the European single currency becoming an international reserve currency. With the financial crises that started in August 2007, in the United States of America (USA), and the subsequent sovereign debt crises, which began in Greece, in late 2009, the Euro Area’s economic performance began to weaken. Therefore, using an ARIMA model to forecast future values, we estimate the target variables, these being the interest rates, the exchange rates, and the growth rates of the GDP, for USA, Japan, China and the Euro Area. We want to examine whether the poor economic performance of the Euro Area, is only a temporary situation, or whether it will last for some more time, which may lead to the end of the use of the European single currency as an international reserve currency. We concluded that the poor economic performance that was verified is largely caused by the sovereign debt crisis, and that is so strong, that the negative effects will prevail until 2016.

Suggested Citation

  • Ana Filipa Dias & António Portugal Duarte, 2012. "Euro Integration Reserve Currency?," Book Chapters, in: João Sousa Andrade & Marta C. N. Simões & Ivan Stosic & Dejan Eric & Hasan Hanic (ed.), Managing Structural Changes - Trends and Requirements, edition 1, volume 1, chapter 8, pages 148-174, Institute of Economic Sciences.
    • Handle: RePEc:ibg:chaptr:msc-8
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    References listed on IDEAS

    as
    1. Issing, Otmar, 2005. "The ECB and the euro--the first 6 years: A view from the ECB," Journal of Policy Modeling, Elsevier, vol. 27(4), pages 405-420, June.
    2. Neaime, Simon & Paschakis, John, 2002. "The future of the dollar-euro exchange rate," The North American Journal of Economics and Finance, Elsevier, vol. 13(1), pages 56-71, May.
    3. António Portugal Duarte & João Sousa Andrade, 2012. "How the Gold Standard functioned in Portugal: an analysis of some macroeconomic aspects," Applied Economics, Taylor & Francis Journals, vol. 44(5), pages 617-629, February.
    4. Jonas, Jiri, 2006. "Euro adoption and Maastricht criteria: Rules or discretion?," Economic Systems, Elsevier, vol. 30(4), pages 328-345, December.
    5. Fink, Gerhard & Haiss, Peter & Oeberseder, Magdalena & Rainer, Wolfgang, 2007. "Dollar depreciation--Euro pain," Journal of Policy Modeling, Elsevier, vol. 29(5), pages 739-763.
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    More about this item

    Keywords

    ARIMA; euro; international reserve currency; sovereign debt crisis;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • G01 - Financial Economics - - General - - - Financial Crises

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