IMF Chapter 16

Question 1

When was the Schuman declaratios and what did it say?

Answer 1

Was on 9th May 1950 and France proposed the first concrete foundation for a European foundation and a European Coal and Steel community so there is no endangering peace in the reconstruction of Germany

Question 2

When was the treaty of Paris and What did it say

Answer 2

1951 and established the European Coal and Steel Community (ECSC)

Question 3

When was the treaty of Rome and what did it do?

Answer 3

1957 and created the European Economic Community (EEC) and European Atomic Energy Community

Question 4

When was the European Monetary system established and what were the exchange rate mechanisms?

Answer 4

1979 and besides the ERM was established and consisted of:
1. Exchange rate band +- 2.25% parity
2. CB acquired credibility through BuBa
3. realign currency if necassary

Question 5

Until when was the EMS succesful?

Answer 5

Crisis of 1992, high capital mobility and bands widened since speculators sold weak currencies

Question 6

Why the EMS to European Monetary Union?

Answer 6

1. Single currency enhanced market integration
2. EMS had become too asymmetric with Buba focusing on IB and Non-german CB on EB
3. Single currency not in danger of speculative attacks
4. Political Unification

Question 7

What did the EMU consist of?

Answer 7

2 parts:
1. Economic Union: Common market + coordination of economic policy
2. Monetary Union:
Total convertibility of currencies
Fully Intergrated financial markets
Irrevocably fixed exhcange rate

Question 8

What were the benefits of a Monetary Union?

Answer 8

1. Less uncertainty, confusions and transaction costs
2. More trade, investment and better allocation
3. More growth and less monetary reserves needed

Question 9

What were the costs of a Monetary Union?

Answer 9

1. Economic stability loss
2. No room for independent monetary policy and exchange rate policies to stimulate the economy
3. Transition costs

Question 10

What is OCA?

Answer 10

Optimum currency area which is a region where the economic efficiency would be maximal if a single currency was used.

Question 11

What was the Maastricht Treaty?

Answer 11

It was in 1991 and specified a timetable, Criteria of convergence of national economic performance

Question 12

What were the Criteria of convergence in the Maastricht treaty?

Answer 12

1. Low inflation
2. Low long-term interest rates
3. Government budget deficit < 3% of GDP
4. Government debt < 60% of GDP
5. Within ERM for two years

Question 13

When and what was the Stability Growth Pact?

Answer 13

In 1997 and its the medium term budgetary stance has to be close to balance or surplus + penalties if >3% of GDP

Question 14

What was ERM II?

Answer 14

1999, Peg currency to euro+ avoid asymmetry and this discourages competitive devaluations against euro and provide a way to satisfy the Maastricht criteria.

Question 15

What were the causes of the Greek Crisis in 2009?

Answer 15

1. High public debt/GDP ratio
2. Credit crisis
3. Structural problems
4. Data revisions made clear that debt/GDP was even higher

Question 16

How was the Bailout of Greece structured?

Answer 16

2010 bailout, loan from EZ countries and IMF
2012 bailout and debt forgiveness
and conditional on austerity measures

Question 17

When and what was the ESM?

Answer 17

European Stability Mechanism in 2012 with permanant intergovernmental organization that can lend to EZ members to avoid speculative attacks

Question 18

What and when was the FIscal Compact?

Answer 18

2013 and it toughens the SGP

Question 19

What were the two pillars of the ECB Banking union in 2016?

Answer 19

Single supervisory Mechanism (SSM): ECB monitors largest EZ banks
Single resolution mechanism (SRM)

Question 20

When and what was Draghi press conference about?

Answer 20

2014 and recognized that exchange rates mattered for inflation and signaled looser future monetary policy.