Integrate Currency Article For Free

There are two methods central banks can use to affect the exchange rate. The indirect method is to change the domestic money supply. The direct method is to intervene directly in the foreign exchange market by buying or selling currency.

There are currently four currency unions in the world?the Central African Economic and Monetary Community, the Eastern Caribbean Currency Union, the European Monetary Union, and the West African Economic and Monetary Union?all of which delegate monetary policy and, to varying degrees, exchange rate and financial sector ...

"Monetary integration" has two essential components. The first com- ponent is what might be called an exchange-rate union, that is, an area within which exchange rates bear a permanently fixed relationship to each other even though the rates may?in unison?vary relative to nonunion currencies.

Indirect currency intervention is a policy that influences the exchange rate indirectly. Some examples are capital controls (taxes or restrictions on international transactions in assets), and exchange controls (the restriction of trade in currencies).

But the end result is a complete exchange-rate union?literally monetary integration. It means that the government of any one of the partner countries can no longer run a deficit that is financed by its own central bank. Either the Community central bank must finance it or the government must go on the open market.

European monetary integration refers to a 30-year long process that began at the end of the 1960s as a form of monetary cooperation intended to reduce the excessive influence of the US dollar on domestic exchange rates, and led, through various attempts, to the creation of a Monetary Union and a common currency.

The most prominent example of a monetary union at the turn of the 21st century was the creation of a single currency among most European Union (EU) countries?the euro. This example demonstrates the interplay of economic and political factors in the process of setting up a monetary union.