Business and the ECU, Rejecting a Parallel Currency - Essay Example

Running Head: US- EU US- EU [Insert [Insert of US- EU Introduction Educational institutions--explicitly including universities--are not philanthropic islands of abstract debate. This maxim of the German President is borne out by this colloquium, for this is not merely an 'abstract debate'. The subject is of great practical relevance: 'the euro: a challenge to, and opportunity for, the financial markets'. And there can be no talk of an 'island', either, for this is a cross-border, joint meeting of SUERF and the CFS. Incidentally, the motive is the exchange of knowledge with the financial community including central banks, thus avoiding all suspicion of insular ivory-tower erudition. There can be no doubt that the financial community will likewise benefit from an exchange of knowledge.1 After all, the euro was and is an intellectual challenge for all those concerned with it. An interesting exchange of views is therefore to be expected, and a debate based on two fundamental perceptions may be fruitful: 1) A consistent monetary policy, committed primarily to the target of stability, is the best contribution a central bank--no matter whether the Bundesbank or the European Central Bank (ECB)--can make to the viability of the financial markets. Without stable money, the financial markets cannot function properly. 2) Conversely, it must also be said that monetary policy needs an efficient, highly competitive and stable financial system. In the first place, a financial sector that is susceptible to disruption poses risks to the entire monetary system, and thus also to the safety of the currency. Second, in a stable environment, monetary policy impinges on economic activity more smoothly. That was and is true of the Bundesbank's monetary policy.2 It is bound to apply to the European System of Central Banks' (ESCB's) monetary policy as well. Clarity now obtains in some matters of significance to financial market players concerning the euro. The future framework for economic policy action is now emerging ever more clearly. Since its constitutive meeting in June 1998, the ECB Governing Council has taken a multitude of important decisions. There is broad clarity today about the arsenal of instruments with which the ESCB will operate. The primary buttress of refinancing will be repo transactions, which have been so successful at the national level. The interest rate for this main source of finance will lie within the corridor whose ceiling and floor are marked out by the interest rates for the marginal lending and deposit facilities. These principal elements of the range of instruments have been designed with the intention of the money market developing as steadily as possible, so that recourse to fine-tuning instruments can be relatively rare. The same purpose is served by minimum reserves, which are often criticized in banking circles. At a rate of 2 per cent, the cost burden is kept within very narrow bounds, especially considering that, owing to the envisaged payment of interest on minimum reserves, the banks' working balances, which will have to be held anyway, will yield interest. In the envisaged form (a reserve to be maintained as a monthly average) they will act as a buffer in the money market. They can therefore largely cushion unforeseen fluctuations in the demand for liquid funds without any major central bank intervention. A very important step on the way to a single monetary policy is the agreement on the main elements of the monetary policy strategy that was reached in the ECB Governing Council on 13 October 1998. These elements contain the quantitative definition of price stability as the primary objective of the single monetary policy: 'Price stability shall be defined as a year-on-year increase in the Harmonized Index of Consumer Prices for the euro area of below 2%.' By this decision, the ECB Governing Council is following up to a large degree the Bundesbank's successful strategy, while at the same time taking due account of the specific conditions prevailing in the euro area, especially at the start of EMU. 3 Monetary policy must always pay heed to the specific conditions prevailing. For instance, the conditions for monetary policy in the future euro area differ to some extent from those in the United States and also in the United Kingdom. Beside the different levels of central bank rates, there are differences in the position in the business cycle and in the intensity of the trade relations with the crisis regions, not to mention the specifically European subject of the convergence of central bank rates. On the continent of Europe, by contrast, conditions have so far been distinctly more favorable. The economic upswing in the future euro area is now more broadly based. Internal expansionary forces are in the ascendant. Our trade relations with the crisis regions are not so close that the crises there are bound to trigger a recession in Europe. But besides the comparatively reassuring perception that those crises are unlikely to spill over to us (at least in the short run) through the channel of trade relations, there is increasing concern that the crises might, instead, come right into our 'front room' through the channel of financial relations4, via the global financial markets. That concern also owes something to the fiasco of the hedge fund Long-Term Capital Management, and to the response it triggered. Many people are wondering whether the greater part of the problem is not still floating below the surface, as with an iceberg. And many people fear that the present crises might result in a structural weakness of the financial system with regard to appropriate risk transformation. The first aspect concerns the emerging countries. There is a danger that, as it were, the financial markets will now withdraw from a whole category of countries without distinguishing sufficiently carefully to what extent individual countries have made structural progress. A second aspect--albeit very vague--might be seen in the fact that banks may be less willing to run risks in extending credit, especially to enterprises. But it is not only the financial markets that should differentiate appropriately when taking investment decisions and assuming risks. The responsible politicians and central bankers should likewise make adequate distinctions in their analyses. General panic is unwarranted, and there is no reason for lapsing into an apocalyptic mood. A dispassionate analysis shows that there are a number of factors stabilizing the world economy. They certainly include the high degree of monetary stability worldwide. They also include the favorable overall performance in the future euro area, and they likewise include the still favorable course of business activity, by and large, in the English-speaking area. What is more, many analysts make far too little distinction between developments of crisis proportions, on the one hand, and adjustments of previous exaggerations, which may even be desirable in the medium run, on the other hand. That applies, for instance, in part to some equity markets. Not blind political hyperactivity, but action in steps, albeit target-oriented action is on the agenda, because there have for some time been a number of sound and promising approaches at the level of international cooperation. Those approaches must be implemented. That builds more confidence in the markets than all new announcements of generous financial programmes. There are likewise reasonable approaches to making what many people regard as over-sensitive financial markets more resilient again. It is generally agreed that the global financial markets need greater transparency in order to improve their viability. Firstly, more transparency at the national level is required: beside macroeconomic data, financial market data must be monitored more carefully than before. Above all, more, and more up-to-date, particulars on national debts in foreign currencies, and on maturities, are required. This is a challenge to borrowers and lenders alike. Second, more transparency is needed at the level of market players. The experience of the past few days has shown that there seems to be a particular need to take action in the case of hedge funds. How this is to be done can still be discussed.5 An indirect solution has been proposed: banking supervisors monitor the lending of an individual bank to a hedge fund. The data are then compiled through an international credit register. Taking hedge funds as the starting point has been proposed. It may well be true that they are so flexible that they can elude direct supervision whenever they want, but when it becomes apparent which hedge fund discloses data and which does not, then the market can discipline itself. Then it is competition that determines the degree of transparency. Be that as it may, if hedge funds are as important for the overall system as those responsible in the United States judge them to be, then they cannot remain exempt from supervision. Third, more transparency is necessary about the financial instruments posing risks. That applies, for instance, to derivatives in bank balance sheets. And fourth, more transparency about the activities of the international financial institutions themselves can do no harm. On the one hand, it is true; the confidentiality of discussions must be upheld. On the other hand, the recipients of public funds must be subject to a strict assessment of performance. A clear target-oriented stance, rather than hyper-activity: that motto likewise applies to monetary policy. A relaxation beyond the degree that is consistent with domestic stability is beneficial to nobody. In the medium and long run, it actually does harm, not only to the country itself but also to the global economy as a whole. That is a lesson taught by the current problems in Japan. They are due not least to the overly expansionary monetary policy pursued in the late 1980s. At the time, Japan regarded that policy as a contribution to international cooperation, and it was actually called for by the United States. That does not mean that monetary policy should bury its head in the sand. Without any doubt, given the crises besetting many parts of the world, the euro has passed its first acid test. That is graying. The markets regard the euro as a safe haven. In that respect, it has already become a serious rival to the dollar. Exchange rates in the EMS between the future euro currencies have remained stable. That demonstrates two things: the markets have accepted the transition to monetary union as being irreversible, and the euro and the independent European Central Bank are enjoying a high degree of confidence in investors' eyes. Literature Review A common or a single currency The market-driven approach to EMU had seemed a neat strategy to bring Europe closer to monetary union without needing a prior top-level political commitment. However, the promotion of the ECU reached its limit - and the strategy developed by the Giscard-Schmidt Committee turned out to have less impact than hoped for. As soon as monetary stabilization spread, the ECU's main advantage of risk reduction diminished. It became clear that companies needed a single, not a supplementary currency to fully profit from the single market. Despite its limits the market-driven approach to EMU had triggered a political process, which led to the Delors Report on EMU. In close co-operation with European central bankers, the Commission President suggested an institutional approach to EMU, including the creation of a European Central Bank.6 But the report hesitated on linking it explicitly to a single currency. The input and support of the private sector remained crucial in putting the single currency on the Maastricht agenda. Business and the ECU De Maigret was convinced that the use of the ECU should be promoted as strongly as possible. Market research had shown that a vast majority of business leaders desired a common currency as a complement to the single market. Eighty-six per cent of all respondents, 60 per cent in Germany, 79 per cent in the United Kingdom and 98 per cent in Italy favored stable exchange rates, leading to lower cost and risk in currency management and supported the idea of using money as a vehicle to Europe's unification.7 The credibility of a big internal market seemed to be in question, as long as no common currency ensured its coherence and irreversibility. However, the ECU was insufficiently known: Ten years after its creation, only 5 per cent of all business leaders responded that they knew the ECU very well and 30 per cent rather well. While 47 per cent of businesses had already used it in Italy, only 5 per cent in the Netherlands and the United Kingdom had done so. For many, the Deutsch-mark seemed more competitive, especially for treasury operations in foreign currency. The poll revealed the reasons: the weight of old habits, the absence of an ECB, and insecurity about the future institutional environment. In view of the enormous public relation activities that followed ten years later for the introduction of the euro, it is interesting that 84 per cent of business leaders requested better information about the use of the ECU and 75 per cent thought that their bank was in the best position to provide it. The Gallup study concluded that 'a vast information effort and clear public support would lead to a vigorous development of the private use of the ECU'. This seemed to confirm the market-led approach to EMU developed by the Giscard-Schmidt Committee. If companies used the ECU to save money, it would send a clear message not only to policy makers, but also to the public in general. The AMUE shared the consensus that the ECU should be pushed. Despite significant reluctance in Germany and the Netherlands, they believed in the power of practical activities to demonstrate the private sector's commitment to a European currency.8 They cared little about the bitter political conflicts between central banks and finance ministries over the ECU issue. De Maigret knew that some Germans hoped the Deutsch-mark would become the European currency. Even outside Germany, some journalists and academics argued that the most direct way to get to a European currency was to Europeanize an existing national currency.9 For example, Richard Cooper, Professor at Harvard University and a former chairman of the Federal Reserve Bank of Boston, had first nominated the British pound sterling for this role because of the highly developed financial market in London. He later switched allegiance to the Deutsch-mark for reasons of credibility. However, this would not have been politically acceptable within the European Community. A European currency had to be politically neutral and the ECU as a currency basket was exactly that. Thus, the Association chose the ECU as its battlefield. It started to report successful experiences by companies in its newsletter ECU for European Business. In its first issue in 1989, Alcatel N.V. reported that the ECU was its 'European weapon'. As allowed by Dutch law, the company published and reported all its results and pre-tax annual result in ECU, without having to convert it back into guilders.10 Alcatel also made short-term investments by buying ECU-denominated commercial paper from banks and was the only firm of such a size, which used the ECU for all management purposes. Rejecting a Parallel Currency For Carchedi (2000), a parallel currency was the opposite of a monetary union, which he defined 'as an area with either a single currency or with national currencies where fluctuation margins were eliminated, full convertibility guaranteed and central rates irreversibly locked'. Bundesbank President Karl Otto linked the idea of a parallel currency directly to the ECU. He objected to the promotion of the ECU on the basis that a parallel currency involved: The risk that national monetary policy would no longer be able to fulfill its mandate to ensure stability owing to larger-scale central bank interventions. The argumentation on the advantages of a single currency reflects the caution that was appropriate, given the political state of mind in Europe. The idea of one single currency was still far from being accepted in many European capitals. 11 One Market, One Money Delors was aware that he had not fully solved the issue of creating a monetary union. He was worried that his Report would be filed with historic documents like its precursor, the Werner Report. Soon after he had transmitted his report to the Ecofin, Delors asked his staff, especially Joly Dixon in his cabinet, Michael Emerson, Director for the Economic Evaluation of Community Policies, and Pierre Mingasson, previously Director of Monetary Affairs, to think about ways to convince the general public in Europe of the benefits of a monetary union. He had thought of a major study like the famous Cecchini Report, which had established the benefits resulting from the single market programme.12 However, Emerson quickly pointed out that the new project was more complicated: there were not only benefits to be expected, but also costs. One would have to examine the balance between the two. Emerson put together a team of senior economists, including Jean Pisani-Ferry, Marc van Heuklen, and Daniel Gros, to study the subject.13 This led to a revival of the optimum currency area theory, developed in the early 1960s by Robert Mundell; setting criteria for establishing when giving up a national currency would yield benefits. Highly influential in academic circles, optimum currency area theory poisoned the debate on EMU for over a decade by focusing on why countries should not join a single currency. When the Commission reports One Market, one Money14 appeared in October 1990, it combined three stances of thought: 1 The academic literature concerning optimum currency areas which has dominated macroeconomic debates on EMU ever since. 2 The arguments by practitioners and businessmen who were primarily concerned with the contingent dangers of the inconsistent quartet. 3 The transaction cost argument, which provided a micro-foundation for the single versus a common currency.15 The AMUE provided input into the last two strands of the arguments, in particular by producing the report A Strategy for the ECU. This made it influential with European decision makers, but less so in academic circles, which became obsessed with the first line of thought. Hypothesis In this research, the opportunities and threats related to euro and its impacts on USD will be explored. Many economists and the media, declaring that the euro would turn out to be a strong currency comparable to the US dollar, enjoyed the preamble of the euro. The euro would unswervingly compete in opposition to the dollar and would become universal accumulate of value. During the first two and half years of the, its value decreased against the dollar. This depreciation of the euro at its lowest point was a reduction of its value to 67 percent of its value at opening. By late December of 2005 there was definitive turnaround of this drift upward in 2005 that has resulted in over 20 percent appreciation of the euro versus the dollar. Methodology This research was conducted on the basis of theoretical ground of available text and studies. The researcher conducted in-depth study of literature available in medical journals. Research articles and research reports are also included in present research that are available in the references section. Research Findings and Discussion Contrary to policymakers' ambitions for the euro, the widespread view among economists is that the new currency is likely to be less stable than its main national predecessors. There is less agreement whether the euro will be an inherently strong or weak currency. A number of factors are expected to contribute to euro instability, principally: the large size and relatively closed nature of the euro area, which suggests that, ceteris paribus, exchange rate variations will have a smaller impact on participating economies than before EMU, and so will matter less to them; the emphasis, enshrined in the treaty, on internal price stability as the ECB's primary objective, which suggests that monetary policy will give little weight to exchange-rate stability; and the non-availability of national exchange-rate adjustment for buffering shocks which have differential effects on participants' economies, implying that a heavy onus for coping with shocks will fall on the euro interest rate, with uncomfortable consequences for the exchange rate. Subsuming all these arguments is the worry that, if and when the euro develops into a global currency, it will prove to be at least as unstable as the dollar and yen have been, and further polarization might add to those instabilities.16 Although these concerns appear widely shared, the arguments are not entirely clear-cut. As Mojon and Pisani-Ferry (1997) have pointed out, it is important when discussing prospects for the euro to distinguish between transitional and long-run stages of EMU, between currency instability within Europe and externally, and between alternative regimes against which to compare EMU. The present paper focuses on exchange rate stability between EU currencies and the key non-European currencies, mainly in a long-run context (assuming that the euro is successfully established as a credible low-inflation currency). The relevant comparator is taken to be the status quo of the ERM, namely a system of pegged but adjustable rates with very broad bands, within which a core group of currencies pursue close de facto stability against the anchor currency, the Deutsch-mark, while a peripheral group maintain relatively loose commitments, amounting to quasi-floating in some cases. With these reference points in mind, the research addresses three topics: 1 The likely causes of euro instability and the implications for exchange rate variability in the new regime. As a way into these questions, the next section of this paper reviews the experience of major currencies during the era of generalized floating since the end of Bretton Woods, drawing on some new estimates of long-period exchange rate variability. Attention then turns to particular sources of euro instability, including the much-discussed 'overhang' of dollar reserves in the EMU area and the potential role of private international capital flows, which could be a crucial factor in due course if the euro develops as an investment currency with global appeal. 2 The economic implications of exchange-rate volatility in the EMU area, and the possibility that they will be uneven as between participating economies. This topic is explored in the next section with the help of some new simulations using the NIGEM model, a large multi-country model developed and operated at the National Institute of Economic and Social Research (NIESR). The simulations examine the impact of exogenous exchange rate disturbances on individual economies, under the assumption of a single monetary policy aimed exclusively at price stability in the medium term; attention is paid to differences in national monetary transmission mechanisms and labor market responses.17 3 The implications for the management of the new currency by its policymaking authorities. The next part of the paper argues that EMU's policymakers would be unwise to ignore the euro exchange rate, but should instead aim systematically to limit euro instability, so far as this can be done without jeopardizing the ECB's price-stability objective. In a world where strong commitments to nominal exchange-rate stability among major currencies are out of favor, this points towards a unilateral strategy of managing the real euro exchange rate, along the lines of the flexible 'target zone' approach suggested by Obstfeld in 1998. Such a policy would not only offer the best available prospect of external stability for the euro, but also facilitate the development of a regional euro-centric zone embracing currencies in the expanding EU and its vicinity, which will be among those to suffer most if the euro proves unstable. It would also leave open the door for initiatives at the G3/G7 level, or bilaterally with the US authorities in an increasingly 'bipolar' currency world. Impacts of Euro on USD An important concern addressed in many recent studies has been whether EMU might result in a net excess supply of foreign exchange reserves within the European System of Central Banks (ESCB) and, if so, what implications this might have for the dollar and its exchange rate against the euro. EMU will automatically result in a reduction in the supply of foreign exchange reserves available to EMU countries: any reserves held by an EMU participant which are denominated in other participants' currencies will automatically cease to be foreign exchange. There will also be a reduction in the demand for reserves, because of economies of scale in pooled reserve holdings, the re-denomination of intra-EMU trade and financial flows, and the elimination of ERM intervention obligations among EMU participants. Much less certain are whether the net result will be an overall excess supply or excess demand. Estimates range from a large excess supply of (predominantly dollar) reserves of up to US$ 200-230 billion18 to a possible excess in demand of up to US$ 55 billion19. The differences in these various estimates reflect differences in methodologies and assumptions about central bank behavior as well as deficiencies in publicly available data of official reserve holdings. Two Council Decisions are in preparation that will entitle the ECB to call up further reserves from NCBs and will place restrictions on the use to which reserves held by NCBs may be put. The residual reserve holdings are also very unevenly distributed, with some countries (notably France) probably facing a need to acquire foreign exchange if the ECB were to make a further call. Furthermore, if allowance were made for the sizeable foreign (non-EMU) currency debt of some of the participating countries, the net stock of 'free' reserves within the ESCB would be a relatively modest US$ 42 billion20 --only two thirds the size of the reserves of Germany when it was underpinning the ERM--and the net position of six countries would be negative. Global Shifts into Euro Assets Potentially much more likely sources of euro exchange rate volatility than the residual dollar holdings of the EMU countries are shifts in the currency composition of other countries' official reserves and of international investors' portfolios. As a result of the re-denomination of the EU-11 countries' own reserve holdings of EU currencies, the world total of official foreign currency reserves held in the currencies of the eleven EMU countries will fall by about US$ 80 billion, from 16 per cent to 11 per cent of total world reserves.21 If the attraction of the euro as a reserve currency to official holders outside EMU were sufficient to restore its share of world reserves to that taken at present by the currencies of the eleven participating members of EMU, their euro holdings would rise by US$ 66 billion; for the euro, over time, to achieve a share equal to that of the US dollar in non-EU countries' reserves would require (assuming other currencies' shares are unchanged) a switch from the dollar to the euro of US$ 260 billion (in 1996 terms); and, similarly, equality with the dollar in total world reserves would entail a switch to the euro of US$ 360 billion.22 The credibility of the euro as a store of value over the longer term--and its attractiveness as an anchor currency for countries outside EMU--will be determined not only by the monetary policy pursued by the ECB but also by the fiscal policies of the participating countries and the exchange rate policy (if any) which they collectively adopt. It will also depend on the extent to EMU results in a single homogeneous market in government securities across the Eurozone, rather than one that remains segmented by national differences in issuing terms or tax treatment. The euro's value to reserve managers as a currency hedge will also depend on whether its exchange rate shows greater variability than the national currencies it replaces has shown collectively. Future of Euro The euro may have grown up quickly, but it is just seven years old. Much work requires to be performed to crack down the blockades within the euro zone, let unaccompanied work out how to include the countries of central and eastern Europe -- and of course the UK. Euro developed more easily and more rapidly than one could have dreamed. And when one thinks about the result in terms of the liquidity and depth of the market, the euro has achieved is far beyond the expectations. The size of dealings that the euro capital market is now able to lodge is way in excess of anything anticipated by even the keenest evangelists of monetary union. Perhaps more noteworthy than the size of the first Freddie Mac euro reference note transaction in September 2000, conversely, was the angst that occurred following its proclamation about the potential effect of such a large transaction on the borrowing plans of European issuers in their own backyard. In the event, the angst was misplaced, with the euro investor base indicating an amazing capability to contain scores of multi-billion euro transactions. It is evident, for example that most Germans would have looked thoughtfully to the north on the day after the Swedes were given the chance of rejecting euro entrance. If the latest opinion polls are anything to go by, Germans would respond to the chance of articulating a similar view in a referendum. According to a Euro-barometer survey performed abruptly before the Swedish referendum, a frighteningly low 28.1% of Germans are content with the euro. That puts Germans a long way underneath the subsequent unhappiest set of voters, which are the Greeks (42.9%), and a million miles away from the ecstatic citizens of Luxembourg, 90.1% of who are actually delighted with the single European currency. In spite of the liberated joy of those in Luxembourg, polls such as these make the small history of the euro look like a tragedy. So could increasing popular dissatisfaction mean that the euro plans is in danger If the single currency is consequently here to stay, in all conditions other than absolute war in Europe, where next for the euro capital market Obviously, as a capital market it has previously ticked numerous of the boxes that investors were hoping for. It has, for example, previously provided financiers with a large and diversified range of credits. Inside triple-A land Europe is at the present possibly a more diversified market than the US; while at the conflicting end of the range a progressively broader high yield market is now emerging. In addition to providing an increasingly wide range of credits, the euro capital market has in contemporary years offered investors a comprehensive yield curve and a broader range of structures, ranging from the inflation-linked products through to a deep and liquid market for advantage backed securities and a progressively more pan-European covered bond market. Simultaneously, as the euro has achieved global reliability it has won a rising level of recognition among significant investors beyond Europe. The euro is gratifying the global acceptance, which has to be good news for government and agency issuers. The institutions are now selectively purchasing euro assets in maturities ahead of the staple five year tenor. What of the landmarks that still require to be achieved if the credibility of the euro capital market is to be improved even further, of which there are plenty References 1. De Menil, G. "Real Capital Market Integration: How Far has it Gone What Will The Effect of The Euro Be" Economic Policy, 28, 1999, pp. 167-201. 2. MacLennan, D.; Muellbauer, J.; Stephens, M. "Asymmetries in Housing and Financial Market Institutions and EMU," in T. Jenkinson (ed.) Readings in Macroeconomics, Oxford University Press: Oxford 2000. 3. Le Riche, Timothy. 1999, "Closure date set of leaves void at Heritage Mall." Edmonton Sun: July 44. 4. Rose, A. "One Money, One Market: the Effect of Common Currencies on Trade," Economic Policy, 30, 2000, pp. 9-12. 5. Demertzis, M; Hughes Hallett, A.; Rummel, O. "Is a 2-Speed System in Europe the Answer to the Conflict Between the German and the Anglo-Saxon Models of Monetary Control," in S. Black and M. Moersch (eds.) Competition and Convergence in Financial Markets-The German and the Anglo-American Models, Elsevier North Holland: New York, 1998. 6. Rose, 2000, pp 34-36. 7. Freeman, A. (1998), "The Emperor's tailor: the economists and the crash of '98", www.greenwich.ac.uk/ fa03. 8. Frankel, J. A., Rose, A. "Estimating the Effect of Currency Unions on Trade and Output," Discussion Paper 2631, Centre for Economic Policy Research London, 2000. 9. Potts, N. (2001), "Kalecki, any old idiot and the European Central Bank", European Business Review, Vol. 13 No.3, pp.166-84. 10. Freeman, A. (1996), "Price, value and profit - a continuous, general treatment", in Freeman, A., Carchedi, G. (Eds), Marx and Non-Equilibrium Economics, Edward Elgar, Cheltenham, pp.225-79. 11. Hughes Hallett, A. "When Does a Common Currency Increase National Income" mimeo, Department of Economics, Vanderbilt University, Nashville, TN, 2002. 12. Hughes Hallett, A.; Piscitelli, L. "Does Trade Cause Convergence" Economics Letters, 75, 2001, pp. 165-70. 13. Martin, A. and L Mauer, 2000, "A Cash-Flow Approach to Measuring Foreign Exchange Exposure Management." Corporate Finance, vol.4, no. 6, May/June, pp. 15-18 14. European Commission. "Market, One Money, "European Economy, 44, Luxembourg, EC Official Publications, 1990. 15. Carchedi, G., de Haan, W. (1996), "The transformation procedure: a non-equilibrium approach", Marx and Non-Equilibrium Economics, Edward Elgar, Cheltenham, pp.136-63. 16. Lees, F. and L Mauer, 2003, "The Eurozone Formation: MNC and International Bank Reactions." Thunderbird International Business Journal. 17. Obstfeld, M., Peri, G. "Regional Non-adjustment and Fiscal Policy," in D. Begg, J. von Hagen, C. Wyploz, and K. Zimmerman (eds), EMU: Prospects and Challenges for the Euro, Blackwell, Oxford, 1998. 18. Carchedi, G. (2001), For Another Europe: A Class Analysis of European Economic Integration, Verso, London. 19. Demertzis, M; Hughes Hallett, A.; Rummel, O. 1998, pp 31-32. 20. Baimbridge, M. Burkitt, B. & Whyman, P. (Eds.) 2000, The Impact of the Euro. New York: St. Martin's Press. 21. Eurostat (1998), Statistics in Focus, Research and Development, Eurostat, Luxembourg, No.2. 22. Capell, Kerry. (2000), "Britain: lighting a fire under Marks & Spencer." Business Week International: 35. Read More