Analysis of the Economic Impacts of the Euro, the Efficiency of the Euro in the Optimum Currency Area, and the Place of the Euro in Global Economics

Abstract

The introduction of the euro has led to three dominant currencies in the financial markets, namely the euro, dollar and yen. The use of the euro as the single currency is a key element for economic and political unification in the EU (European Union). While some of the criteria for achieving monetary integration between the European Monetary Union (EMU) member countries in the euro area have been satisfied, some problems still remain. As the euro is not the currency of a single country like the dollar, the dollar still retains its dominant position in the international markets. After the Brexit referendum, apprehension regarding the collapse of the EU has reached a peak. Originally introduced in 12 EU member countries, and since extended to 19, the euro may potentially embrace 27 member countries. In this study, the economic impacts of the euro on the per capita income, inflation rate and foreign direct investment are analysed. The analysis will be performed on three countries participating in the EMU, namely, Germany, France and Italy.