Euro Integration Reserve Currency?

Ana Filipa Dias and António Portugal Duarte
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Ana Filipa Dias: Faculty of Economics, University of Coimbra

Chapter 8 in Managing Structural Changes - Trends and Requirements, 2012, vol. 1, pp 148-174 from Institute of Economic Sciences

Abstract: Since its creation, the euro has raised high expectations among the investors and within the countries that chose to adopt it. This chapter aims to study the possibility of the European single currency becoming an international reserve currency. With the financial crises that started in August 2007, in the United States of America (USA), and the subsequent sovereign debt crises, which began in Greece, in late 2009, the Euro Area’s economic performance began to weaken. Therefore, using an ARIMA model to forecast future values, we estimate the target variables, these being the interest rates, the exchange rates, and the growth rates of the GDP, for USA, Japan, China and the Euro Area. We want to examine whether the poor economic performance of the Euro Area, is only a temporary situation, or whether it will last for some more time, which may lead to the end of the use of the European single currency as an international reserve currency. We concluded that the poor economic performance that was verified is largely caused by the sovereign debt crisis, and that is so strong, that the negative effects will prevail until 2016.

Keywords: ARIMA; euro; international reserve currency; sovereign debt crisis (search for similar items in EconPapers)
JEL-codes: C53 E43 F40 G01 (search for similar items in EconPapers)
Date: 2012
ISBN: 978-972-9344-06-0
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