POL207Y1 Final: Exam review for term 2
Document Summary
Move towards euro began in 70"s and 80"s spurred by collapse of bretton. Wood agreement which pegged everybody to the us dollar. Us dollar and thus mark increased which was bad for trade in europe so moves towards fixed exchange rate and then common currency began. This is all very exciting but there are r isks. Political benefits: asymmetrical exogenous shocks: countries can"t devalue their currency if there are local economic issues. Euro was the 90"s big idea: i t could be a common symbol of europeanness, commission believed that the common currency necessarily grew out of common market. Mitterand comes to power in france, t ried to socialize but all he got was inflation. The franc was failing and socialism wasn"t working. Saved himself by commiting to the european monetary system. Ems worked well, ensured broad exchange rate stability and routinized devaluation.
