European Union Central Bank

Published Date: 02 Nov 2017

The main task of the UAE Central Bank is to make sure all the commercial banks are formulating properly. And to also formulate monetary policies and credit policies, and to grow UAE’s economy.

UK Central Bank:

The Central Bank of UK was initially made to act as a banker of the government and its debt manager. Now it is responsible for handling all other British banks and for the nation’s financial system.

European Union Central Bank:

The main function of the European Union Central Bank is to maintain a stable price and avoid inflation specially nations using Euro. And to maintain a stable financial system.

US Federal Reserve:

The main task of the US Federal Reserve is to create monetary policies and to take care of the United Nation’s financial stability and other such factors.

Task 2 Monetary Policies

Give a short description of the monetary policy of the UAE

Ans.

The monetary policy of the UAE is made for the prosperity of nation. It is supposed to grow the economy, maintain stable prices, and reduce unemployment. And in every way, try to bring the country to better terms. Their current plans include selling more bonds so as to gain more power financially. Plus they are also planning to invest on more infrastructures, and by this they hope to increase their real GDP.

And so far they have been doing well, but sustainability has been an issues in the past as well. Only time will tell if their current policies will succeed or not.

What does the phrase "monetary sovereignty" mean?

Ans.

It is said that Monetary Sovereignty is the foundation of economics. Monetary policy is the capability of the state/nation to conduct control over their currency, specially through Legal Tenders.

Why does the UK not use the Euro? Isn’t the UK part of the European Union?

Ans.

Yes, the UK is a part of the European Union. However, it does not use Euro as its currency. Actually, the nations in the European Union can occasionally negotiation, like an opt-out, from the Maastricht Treaty, for certain policies. UK has negotiated not to use Euro as their national currency.

The reason behind this is because the British people are not in favor of using Euro as their currency. This has been known through various polls. And every time they have generated simple and clear results, showing that the public prefer their current currency, Pound’.

Task 3 Data Collection

Item

January 1, 2013

February 1, 2013

March 1, 2013

April 1, 2013

Dirham v. euro

EUR/AED= 4.84

4.98

4.81

4.70

Dirham v UK pound

GBP/AED=

5.94

5.80

5.57

5.57

Dirham v US Dollar

USD/AED=

3.67

3.67

3.67

3.67

Oil price

$97.5/barrel(Jan 25)

$93/barrel (Feb 25)

$97/barrel (March 25)

$93/barrel (April 25)s

Gold Price

1670 USD/oz

1690 USD/oz

1600 USD/oz

1625 USD/oz

Main Trading Partners:

UAE

Saudi

Bahrain

Kuwait

Oman

Qatar

S. Korea,

Japan

India

Japan

China

South Korea

Saudi Arabia

UAE

Japan

South Korea

India

Japan

China

South Korea

UAE

Japan

South Korea

India

Europe trading partners

UK

Germany

France

Italy

Spain

Germany

Netherlands

France

France

United States

UK

Germany

Italy

Spain

Germany

France

Spain

France

Germany

Portugal

Website used: www.cia.gov

Task 4 European Monetary Union

List the countries that are inside the European Union.

Austria

Belgium

Bulgaria

Cyprus

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Latvia

Lithuania

Luxembourg

Malta

Netherlands

Poland

Portugal

Romania

Slovakia

Slovenia

Spain

Sweden

United Kingdom

All those that use the Euro.

1) Andorra

2) Austria

3) Belgium

4) Cyprus

5) Estonia

6) Finland

7) France

8) Germany

9) Greece

10) Ireland

11) Italy

12) Kosovo

13) Luxembourg

14) Malta

15) Monaco

16) Montenegro

17) Netherlands

18) Portugal

19) San Marino

20) Slovakia

21) Slovenia

22) Spain

23) Vatican City

List the criteria (3 or 4 main fiscal and monetary points set out by Europe) that countries must reach in order to join the Euro. Give a short explanation as to what each one means.

Ans.

The Countries must adopt EURO as the currency.

Monetary policy is transferred to European Central Bank

Independent Central Bank.

The Countries must adopt EURO as the currency, it means that every member country in the EU who adopts EURO as the currency will be a part of convergence criterion that is the exchange rate will be controlled by European Central Bank and the purpose is to ensure greater economic benefits in the Europe as a whole.

Monetary policy is transferred to European Central Bank, it means that ECB will make sure that when a state enters the euro area it can adopt the unified currency and its entry will not affect itself as well the other member countries in the euro zone.

Independent Central Bank, means that before a state enters the euro area it has to make viable changes to its rules and regulations concerning the central bank as it is mandatory for a central bank to be independent just like the ECB to enter the euro area.

Task 5

Should the UAE and fellow GCC countries form this type of monetary union?

Based on the main trading partners of the GCC countries that you found above and the fact that a monetary union in our world today means freedom of movement of people, goods and money in order to increase trade and therefore increase GDP, should the GCC form a union similar to the European Union? You can agree or disagree. Both are acceptable but just tell me why you think the way you do.

I am not looking for a long answer. Anywhere from 300 to 500 words should be fine.

Be ready to answer the same question in the oral defense portion of this project.

Ans.

The concept of unified currency seems to be very much effective and diligent yes it is without any doubts but it is very much difficult to implement it. If UAE forms a monetary union with other GCC countries it would be very much fruitful the entire territory as the boundaries will be laid off, GDP will be enormously affected by it in a very positive manner as the production will increase because of the single currency, fix exchange rates that will alternatively help in controlling inflation as well, unemployment will decrease rapidly, this can be the major step that would bring the western economies to think about what to do next with the European Union as well as it will help Asian countries like Pakistan, India and Bangladesh in a very positive way as it will increase the trade between the middle east union and these countries. The hurdle that seems to create a doubt in my mind is that whether the discipline with which European Union is being can the Middle East Union perform like that . If yes than it’s high time we should think about it before American Currency is launched by the USA. Some more points that should be considered very much important because changing the whole monetary system is not an easy job it is a very complex process that should be done with immense care and at a very gradual pace.

The reason is that if for instance there becomes a Middle East of Gulf Union then there will be a new currency in which all the countries in the region will agree to adopt and the launching of that currency is in itself is a very complex process but if the planning is good it’s achievable.

What is a monetary union?

Ans: It is also known as currency union and in this union two or more countries share a unified currency among them.

How is a monetary union different from a customs union?

Ans : The basic and the core difference between a customs union and monetary union is that, in customs union two or more countries have free trade among themselves while they charge similar tariffs to the rest of the world and in monetary union the countries share a common currency.

What is the UAE involved in currently – a monetary or customs union? Do you think this helps or hinders (hurts) trade?

Ans : UAE is involved in a customs union and it helps the trade because a monetary union is not so easy to form.

What does the IMF do?

Ans : IMF ‘s field of work is economic research and development with statistics. It basically watches world economies, loans to the countries that face problems in their balance of payments as well as loans to the poor countries are a major area of concern in order to fight against poverty.

What does the WTO do?

Ans: WTO is the legislation creator for the trade globally it means that it create laws regarding the liberalization of trade as well as it solves the disputes regarding trade among the nations.

Does the idea of free trade really work? Is there more trade? So more employment internally in the country? Agree or disagree?

Ans : Disagree. It works, there is more trade but the employment goes out of the country because when it comes to lower down the prices the projection is towards the cheaper markets.

Should the GCC form a union similar to the European Union? Why? Why not? Advantages? Disadvantages? Difficult because? Easy because?

Ans : GCC should form a union similar to European Union because it is a very big region and it somehow there is a union it will certainly help the trade, rapid increase in GPD and it is easy because there is already a Customs union among some countries and difficult because unifying currencies into one is a very difficult and complex process.

Should the GCC form a union similar to the European Union? Why? Why not? Advantages? Disadvantages? Difficult because? Easy because?

Same question

Does the UAE having such a large expatriate labor force influence trade policies made by the UAE? How?

Ans : This is a fact the UAE have an expatriate labor force and it has a great influence on the trade policies made by the UAE as multi lingual labor force has almost 90% of the jobs in UAE which means that unemployment for the nationals and because of this bigger percentage the influence is high.

What is fiscal and monetary policy? What does this have to do with monetary Union?

Ans : Fiscal Policy is a governments policy that deals with budget and taxation and monetary policy mainly deals with interest rate and supply of money. The monetary policy in a monetary union is controlled by a single authority which is the central bank for all the member countries of the union and the taxes that will be imposed along with the budget is all controlled by that central bank.

Where does Europe stop? Do new countries keep joining? Turkey? Russia? Norway? Canada?

Ans : The joining of new countries in the Europe Union will continue as the economic strength of the Europe will leave no other option for the countries except joining in but Turkey demarcates Europe fro Asia.

Why do you think the UK doesn’t join in? Wouldn’t it be better for UK trade to be using the Euro? What is the point that stops the UK from joining?

Ans : The only single point that stops the UK from joining in is the bigger influence of the conservative party.

Where did the idea of creating the Euro come from?

Ans : 1946, Winston Churchill gave the idea of "United States of Europe"

Describe what the Gold Standard was?

Ans : Source : "The Encyclopedia of Economics and Liberty" defines the gold standard as "a commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold"

What should be the main goal of any central bank?

Ans : Money Supply and Interest Rate.

We will also look at the data you produce in your project (the tables) and could discuss that as well.