EURO: Implications for the United States-Answers to Key Questions

摘要

On January 1, 1999, 11 of the 15 countries in the European Union (EU) adopted theeuro as a common currency. On the same date, the new European Central Bank (ECB) took control of monetary policy in these 11 countries. This strengthening of economic integration in Europe is generally viewed as a way to foster greater political integration in addition to achieving economic benefits for member countries. Monetary union has created in Europe a new, large economic entity that could become a powerful force in world economic and financial markets. Its emergence has raised questions about how the United States will be affected, in areas ranging from the dollars role as an international currency to the effects on U.S. trade and the relative attractiveness of the United States to foreign investors. For example, over the past half century, the U.S. dollar has been the primary world currency for business transactions, holdings of currency reserves at central banks, and private portfolios. Concerns have been expressed about whether the euro will change the dollars role in these areas and, if so, what the implications will be for the U.S. economy. With regard to policymaking, the advent of the euro has implications for U.S. monetary policy because, although such policy is determined primarily by domestic economic conditions, the Federal Reserve does take international conditions into account when setting monetary policy.