Economics of FOREX. See question below Essay Example | Topics and Well Written Essays - 1500 words

Economics of FOREX. See question below - Essay Example It is the European Parliament that is expected to react on certain economic events that arises over time despite the fact that they do not have the authority to implement policies to counter act the effects. Also, the authorities empowered to act on the ECB for monetary policy and the European Commission for the fiscal policy does not have the right to implement some needed policy to make the overall economy better.3 It means that power and responsibility over the economic activities does not come from a political process. The European policy makers who are eager to come up with solutions to economic shocks do not have the power to react and those who have the authority to do so do not have a democratic right to intervene in any economic situation. Each member of the Eurozone has a mutual assurance regarding the stability of the currency. The purpose of having a ‘single currency’ is to enhance a free trade between the members of the Eurozone by promoting the coordination of credit and exchange rate policies.4 In the case of Eurozone, only the European System of Central Banks (ESCB) has the sole authority to create and implement a monetary policy for all the members of Eurozone.5 ESCB is composed of the European Central Bank (ECB), and the Eurozone Central Banks that operates in Euro countries. Since a single currency imposed on the Eurozone countries, they can use only one monetary policy for all. Hence, only one interest rate among all Eurozone countries is allowed. In case of an economic problem, the national government is therefore deprived of using the monetary policy (monetarism) to solve any economic issues. This leaves them the option to control over the fiscal policy instead. Aside from the political issue attached with having a single currency, this strategy can be beneficial for the participating countries in terms of inter-trading opportunities, currency stability and having a transparency in the costs of goods and