The countries of the European Union have embarked on a major new monetary arrangement. For eleven of the member states of the EU (hereafter the EU-11), exchange rates have been locked since 1 January 1999 as the precursor to the replacement of national notes and coin in 2002. The euro is now a tradable currency on international exchanges and the question that many people are asking is: how influential will the euro be internationally? Undoubtedly, the euro will be a major currency. It will be the largest home currency since the population group is well in excess of the United States and has a combined purchasing power measured by the GDP of the participating states of some 8 trillion US dollars (measured at the end of 1997). The market for securities and loans denominated in euro will be the deepest and the most liquid of all international markets. It is also likely that many countries will hold significant stocks of euros as official reserves.

Paul Mizen

Papers

The Emergence of International Currencies: Will the Euro be Used Internationally?