Thursday, July 25, 2019

The UK is a member of the European Union but has not adopted the euro Essay

The UK is a member of the European Union but has not adopted the euro as its currency. To what extent do the benefits of membership of a monetary union such as the Eurozone outweigh the costs - Essay Example It also aimed to enhance aggregate employment opportunities in these counties. In order to enhance the level of employability, EMU aims to enhance capital investment levels of its member states. Higher sustainability of pensions and public finances are also achieved in these countries through activities of EMU. The Union tries to improve social status of its member states by increasing the extent of welfare maximizing activities in such markets (Minford, 2010). EMU provides monetary assistance to its member states at times of emergency or crisis. If a country faces severe credit crunch and is unable to borrow money from the external market at particular rates, then it can avail the financial assistance facility of EMU. The country needs to firstly negotiate its borrowing program with the European Council and International Monetary Fund (Watt, 2014). The programme also needs to be accepted by other member states of the Union. Finally, after considering all legal regulations, the country receives the loan from European Central Bank (ECB). The amount, rates of interest, duration and procurement related activities are managed by European Financial Stability Facility (EFSF) unit (Minford, 2010). The EMU helps to stimulate economic growth within its member countries. For ensuring this, the Union tries to enhance the level of foreign direct investment (FDI) in these countries. Higher FDI inflow in encouraged by eliminating the transaction cost and lowering risks associated with exchange rate volatilities. Lesser exchange rate volatility helps in stabilizing the prices of goods and services in the market. Moreover, employability in these countries also reflects low fluctuation due to greater stability in wage rates. Transaction costs are the expenses incurred for selling and buying securities in the share market. Such costs are composed of payments of brokers and expenses of spreads. EMU eliminates

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