Economic implications of the EU's single currency on German economy Literature review

Economic implications of the EU's single currency on German economy - Literature review Example In response to globalization, the initiative of the European Commission back in 1969 was put in place to coordinate the economic policies as well as to set a monetary integration among the European Union. On the 1st of January 1999, the ‘Euro’ (â‚ ¬) was launched in the world money markets. Since then, Euro has become the unit of exchange for the EU states except for the United Kingdom, Sweden, and Denmark (Central Intelligence Agency, 2011). The decision behind the European Union is to make the inter-regional and inter-state trading much easier (European Commission. The EU Single Market, 2011). Back in 2007, the goal European Commission has proven to be very successful. Implementing the ‘Euro’ (â‚ ¬) currency in 1999 was part of the strategy used by the European Union to achieve their purpose of making the inter-regional and inter-state trading much easier. Located in Frankfurt in Germany, the European Central Bank was made responsible for the impleme ntation of monetary policies and exchange rate policies throughout the European monetary union (Carbaugh, 2009, p. 280). Likewise, it is the European Central Bank that controls the supply of euros aside from setting its short-term euro interest rate or maintaining a fixed exchange rate for all members of the European Union (ibid). ... To give the readers a better understanding concerning the research topic, this report will first provide a brief overview concerning the economic condition of Germany before and after the country was required to use a single EU currency. As part of conducting a literature review with regards to the potential economic impact of centralizing the currency, this report will focus on discussing the advantages and disadvantages of using the Euro (â‚ ¬) currency in the economic performance of Germany. Finally, the economic consequences associated with using fixed exchange rate policy will be tackled based on the historical experiences of other countries. Brief Overview on German Economy Before and After the Use of EU (â‚ ¬) Currency Back in the 1950s, the economic situation in Germany was highly dependent on the exportation of agricultural and industrial products. In 1988, West Germany and East Germany were exporting a total of US$323 billion and US$30.7 billion worth of different agr icultural, mining, and industrial products respectively (Boyes, 2007). Since there was a high demand for food and non-food products manufactured in Germany, East Germany was able to maintain zero unemployment rate for quite some time (ibid). Despite the fact that the inter-regional and inter-state trading was made easier among the European Union (European Commission – The EU Single Market, 2011), Germany started to go through a series of economic problems. After the single currency was implemented in Germany, the country started to experience economic stagnation in the 2000s combined with a constantly increasing high unemployment rate (Merkel, 2009; Boyes, 2007). Since there were a lot of