General Economics Monetary Policy

Research Paper (undergraduate) , 2008 , 18 Pages

Business economics - Economic Policy

For now more than 6 years, starting in 2002, the US-Dollar continuously depreciates in relation to the Euro but also in relation to other strong currencies in the world. The European System of Central Bank can help the dollar but not without affecting the Euro. A stable Euro with low and constant inflation of 2% is the main objective of the ECB and fixed in their statutes. The depreciation of the dollar can be blended by depreciating the Euro in the same relation but that won’t help for long. The impacts on the domestic economy which consists of a range of multicultural states within the Euro Area would be unpredictable. At least high Inflation to the Euro would follow – with negative side effects to the European countries. Even if a weaker Euro (or stronger Dollar) would help the German exporters the problem of the Dollar is not caused by the strong Euro. Germany is still leading in foreign trade and increases its net-export even though the Euro gets stronger. Since more than 20 years the USA have increased their trade-deficit year on year. The solution for the weak dollar is not a weak Euro. Beside the trade-deficit the enormous costs for military interventions also charge the government budget and lately the population by inflation tax.

Table of Contents

Executive Summary

List of Figures

List of Abbreviations

1 Introduction

2 The European Central Bank
2.1 The objective of the European Central Bank
2.2 Instruments of the ECB and the mechanisms of action

3 The Market of Foreign Currency Exchange
3.1 Impact of Exchange Rates to the Economy
3.2 Measures and Policies against Currency Depreciation
3.2.1 External Measures (monetary policy) against currency depreciation
3.2.2 Possible reasons for US Dollar depreciation

4 Conclusion

Bibliography

Appendix 1 - ITM Checklist

• College: University of applied sciences, Munich
• Author: Manfred Damsch (Author)
• Publication Year: 2008
• Pages: 18
• Catalog Number: V162450
• ISBN (eBook): 9783640772384
• ISBN (Book): 9783640772841
• Language: English
• Tags: Economics, Monetary, Policy, Finance, General Economics, Policies, Central Bank, Zentralbank, FED, federal reserve system, Europäische Zentralbank, EZB, MBA, Assignment, Depreciation, Integral Total Management, ITM