Library Research Assignment Scenario Essay Example | Topics and Well Written Essays - 1250 words

Library Research Assignment Scenario - Essay Example Secondly, individual currency leads to reduced price transparency. This poses a challenge to many firms as they find it difficult to compare the prices of goods, services and resources across various regions. This happens due to the distorting effects of exchange rate variations. Moreover, such firms are vulnerable to uncertainty caused by exchange rate fluctuations. This happens as such firm’s tries to invest in other countries with different currency. This leads to decreased investment and inefficiency in business activities. Additionally, individual currency leads to increased costs to industries because such firms will have to buy foreign exchange in their trade activities. This makes such firms unable to compete with other large trading blocs. Furthermore, this form of currency leads to reduced foreign investment (Schadler, 2005). On the other hand, individual currency has an edge to the nation. First, individual currency is more reliable as compared to integration. This helps in maintaining the exchange rate stability in the country. This prompted the UK and Italy to leave the ERM in 1990 as they found the process ineffective (Anchors, n.d.). Secondly, individual currency offers some stability. This is as compared to integration where there exist rigidities. ... In addition, an individual country is essential in maintaining sovereignty. This helps a country to control the actions of its central bank (Stoa, 2008). This also helps the government in controlling its policies and,therefore, able to pursue policies beneficial to its economic and that of its firms. A rich history exists towards the development of a single currency in Europe. Currently, the euro has become part of seventeen member states of the European Union (EU). However, other member states are required to join the union in the future. The first appeal to the achievement of the European currency began before the market crash of 1929 (Europa, 2011). However, this was not realized due to prevailing economic conditions. The other attempt was after the end of Second World War. In Europe, three treaties bringing all six signatory states (Germany, Belgium, France, Italy, Luxembourg and the Netherlands) laid a foundation (Europa, 2011). The treaties led to the establishment of European Coal and Steel Community, European Economic Community, and European Atomic Energy Community. Besides, another summit in Hague defined a new objective of European integration. A task was formed to come up with various suggestions. The taskforce submitted a report in 1971 envisaging full economic and monetary union in the next ten years (Europa, 2011). Some of the recommendations were not adopted, but there was approval to the introduction of EMU in some steps. The first stage involved the narrowing of currency fluctuations margins with no further commitment. However, the US decision to float the dollar posed the challenge on the parities of the European currencies and hence the project was abandoned (Europa, 2011). Other attempts also faced the same challenge. However,