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THE CHRIS PARASKEVOPOULOS MEMORIAL CONFERENCE Athenian Policy Forum and York University THE FUTURE OF THE EURO AND THE ROLE OF CHINA AND INDIA by Bala Batavia and Tassos Malliaris Toronto, Canada, May 16, 2008. OUTLINE. Brief Evaluation of the Global Economy Currency Markets - PowerPoint PPT Presentation
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THE CHRIS PARASKEVOPOULOSMEMORIAL CONFERENCE
Athenian Policy Forum and York University
THE FUTURE OF THE EURO AND THE ROLE OF CHINA AND INDIA
byBala Batavia and Tassos Malliaris
Toronto, Canada, May 16, 2008
OUTLINE
1. Brief Evaluation of the Global Economy
2. Currency Markets
3. Discussion of the Dollar Weakness
4. The Role of the Euro
5. China and India
LESSONS LEARNED
1. Global Economy is Integrated
2. Fixed Exchange Rates Do Not Last
3. Who is Globally the Engine of Growth
4. The Unpredictability of Crises: From
Emerging Economies to U.S.
The Nature of Crises
1. Currency Crises
2. Banking Crises
3. Financial Crises
4. Economic Recessions
Major Trends
• Trends in Global GDP
• Trends in Global Trade
• Trends in Global Consumption
• Trends in Global Investment
U.S., Euro, and Japan GDP Growth
Figure 2: Global Outlook (Real GDP; percent change from a year ago)
: Key Statistics for 2006
Country/Location
Area(sqkm)
Population(million)
GDP(PPP)($trillion)
GDP-percapita(PPP)($)
World 510.072 million 6,525 60.71 9,500
USA 9,631,420 298 12.36 41,800
EU 3,977,487 460 11.72 25,480
NAFTA 21,588,638 430 12.89 29,942
ASEAN 4,400,000 553 2.17 4,044
UK 244,820 60.6 1.83 30,300
Canada 9,984,670 33 1.114 34,000
Mexico 1,972,550 107 1.067 10,000
China 9,596,960 1,314 8.859 6,800
Japan 377,835 127 4.018 31,500
India 3,287,590 1,095 3.611 3,300
Russia 17,075,200 143 1.589 11,100
Source: CMF World Factbook 2006
Possible Causes of Dollar Decline
• Large Balance of Payments Deficits
• Easy Monetary Policy
• Easy Fiscal Policy
• Concerns about stagflation
Current Choices and Conclusions
1. The EU and Monetary Integration
2. The US and NAFTA
3. The Role of Japan, China and India: Favoring the US Dollar?
4. Mundell on an Asian Currency
5. Trend Towards Fewer Currencies
Figure 6: Euro and Partners versus U.S. and Partners (various scenarios)
Source: Frankel and Chinn (2005) and Modified by the Authors