Impact of Euro Essay

The impact of the Euro has been very significant not only in the European markets but also in the international arena. One of the results is same currency noticeably eliminates the need for transaction costs to convert currencies.  Such financial resources could be used in a more effective way, by producing output that has a greater value to society.

q  The decrease or elimination of transaction costs have increased economic growth and make goods cheaper for consumers.  Smaller firms in the Eurozone are finding consumers in areas they earlier never troubled to export to.

q  Euro brings substantial economic trade through the elimination of exchange rate variations; this helps to lessen costs to manufacturing, as organizations will not have to buy foreign exchange for use within the European Union.

q  The euro has augmented the clearness of prices among nations, this has not only affected the prices of goods and services but also to additional factors which sway the price-setting process, such as taxes.  This improved price transparency will set off more trade and commerce and, lead to greater competition.

Theodore E. Allison Assistant to the Board for Federal Reserve System Affairs has said:

The availability of euro notes will reduce the use of dollars outside the United States, to some extent, for a variety of good reasons. Some U.S. currency is used within the euro area to facilitate travel to other countries… The euro may in time earn a similar kind of status. It seems likely, however, that any major substitution of euros for dollars, as a trusted store of value would take place gradually. (Overall impact of euro banknotes on the demand for U.S. currency)

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