Invented By, Amit Padalkar 31 Mandar Patil 37 Vinita Rodrigues 43 Anand Shedge 49 Tulsi Tanna 55

Invented by, Amit Padalkar 31 Mandar Patil 37 Vinita Rodrigues 43 Anand Shedge 49 Tulsi Tanna 55

INTRODUCTION Currency What is currency

Importance of currency

Common Currency Agreement Centralization Creation & Expansion

COMMON CURRENCY OF THE WORLD Globalization Technology Free trade block Competition

Trade – Zones Tariff and Non-tariff barriers Synchronization of business cycles

Intra-dependence 4. Extent of trade 6. Nature of disturbances 8. Degree of labor mobility

Fiscal transfers

Advantages of common currency Reduction in transaction costs Movement of scientific and technical manpower Reduction in informal trade Pre-empting a Central Bank

European Union •Background

•Establishment in 1957 •Common market

EURO Introduced in 1999 Common currency Implementation stages Economic and Monetary Union (EMU)

Governance European Central Bank (ECB) Criterion for Joining EU - Copenhagen criteria Criterion for adopting Euro - Maastricht criteria

EURO: Advantages Common currency leads to gains in economic efficiency A simple platform for price comparison, makes price

differences more noticeable and helps to equalize it across borders Gains divided into two groups: 1.

Elimination of transaction cost

2.

Elimination of risk which comes from uncertain fluctuation of the exchange rates

Elimination of Transaction Cost: A fixed commission or the spread between the buying

and the selling prices of any given currencies The common financial market in Europe becomes deeper

and more integrated Since January ’99, main financial instruments being

issued and listed in Euros, making prospective investors confident to invest on different EU member's financial markets

Elimination of exchange rate risk Positively affects international business

environment Entrepreneurs facing investment or trade

opportunity, more enthusiastic when the decision does not involve the risk of currency fluctuations

EURO: Disadvantages Two most important costs: 2. Cost of institutions individuals adjustment to a new

currency 3. Lack of national monetary policy as an important

tool for a member state to adjust to the economic equilibrium when it experiences an economic shock

Public and private institutions of the new EU

member state, have to spend enormous amount of money to adjust invoices, price lists, office forms, payrolls, bank accounts, databases, software, parking and postage meters Additional cost of notes and coins

Unexpected changes: imbalance of production, consumption,

investment, government spending and trade Asymmetric shock: economic growth in a country affected by

it goes down while in others it does not Not accepting Euro: handle it using monetary and fiscal

policies Accept: Do not have right to conduct national monetary policy

any more and has to search for different tools to deal with this kind of shocks

SAARC In terms of population - the largest of any regional

organization Ziaur Rahman SAARC secretariat- Kathmandu Sheelkant Sharma 15th summit Colombo – 2008 16th summit Bhutan – 2010 SAPTA – signed 1993. Implemented from 1995 SAFTA – 2004 Zero custom duty on trade by 2016 Pak signed but not ratified. Not willing to offer India MFN

Reasons for Common Currency Characteristic of strong regional economic

integration Eliminate exchange risk promote inter-country trade Reduction of transaction costs and investment. Currency union will promote political unity Reduction in informal trade

Arguments against common CX Low volume of intra SAARC trade Slow progress of the South Asia Free Trade Area

(SAFTA)

Inter regional export COUNT RY

BNG

BHU

IND

MAL

NEP

PAK

SRL

BNG

Nsig

Nsig

Nsig

Nsig

Nsig

Nsig

Nsig

BHU

Nsig

Nsig

35.50%

Nsig

Nsig

Nsig

Nsig

IND

Nsig

Nsig

Nsig

Nsig

Nsig

Nsig

Nsig

MAL

Nsig

Nsig

Nsig

Nsig

Nsig

Nsig

13.40%

NEP

Nsig

Nsig

54.40%

Nsig

Nsig

Nsig

Nsig

PAK

Nsig

Nsig

Nsig

Nsig

Nsig

Nsig

Nsig

SRL

Nsig

Nsig

7.20%

Nsig

Nsig

Nsig

Nsig

Inter regional import COUNT RY

BNG

BHU

IND

MAL

NEP

PAK

SRL

BNG

Nsig

Nsig

14.70%

Nsig

Nsig

Nsig

Nsig

BHU

6.70%

Nsig

85.60%

Nsig

Nsig

Nsig

Nsig

IND

Nsig

Nsig

Nsig

Nsig

Nsig

Nsig

Nsig

MAL

Nsig

Nsig

9.60%

Nsig

Nsig

Nsig

10.00%

NEP

Nsig

Nsig

48.40%

Nsig

Nsig

Nsig

Nsig

PAK

Nsig

Nsig

Nsig

Nsig

Nsig

Nsig

Nsig

SRL

Nsig

Nsig

14.40%

Nsig

Nsig

Nsig

Nsig

Convergence Criteria Exchange Rate SAARC

2009

2008

INDIA

49.9

39.42

MALDIVES

12.96

12.94

PAKISTAN

79.07

61.81

BANGLADESH

70.3

69.56

BHUTAN

48.64

39.42

SRI LANKA

115.08

110.02

NEPAL

79.02

65.08

Inflation Rate

Fiscal Deficit

Political Instability Intra and Inter state conflicts India and Pakistan Slow Decision making Political unification is not a product of common

currency

OUR OPINION Exports of important products, thus better

bargaining power Will have to overcome political instability and

differences Won’t be willing to give up soveriegnity

THANK YOU