EURO: Past,Present and Future

Abstract

The introduction of the Euro was expected to spur the creation of a stable and systemic financial system in Europe. Though the Euro's inception represented the biggest change in the international monetary system since the formation of IMF and World Bank, the currency has lost its credibility due to its continuous depreciation over the last one and half year time period. Instead of creating more opportunities for the consumers and investors, the currency has brought about fresh challenges within the euro area and in countries outside the euro area for the management of risk and financial crisis. The Euro has depreciated around 20 per cent against most of the currencies, since its adoption and this has created uncertainity among the foreign exchange market participants. While the future of the Euro cannot be readily predicted, it is not likely to appreciate over the next two years. This paper examines the exchange rate movements of Euro and its implications through an eclectic approach.