COMMON
CURRENCY
- By Sumaiya Sherief
BARTER SYSTEM
Barter is a method of exchange by which goods or
services are directly exchanged for other goods or
services without using a common medium of exchange,
which came in to existence as money.
ADVANTAGES OF BARTER SYSTEM
Both the parties were mutually benefited.
Don't need a form of currency, can use anything for
exchange.
Helpful in trading of surplus goods.
Easy access to market.
DISADVANTAGES OF BARTER SYSTEM
Difficulty of double coincidence of wants.
Lack of common unit of value.
Lack of system for storage of value.
No growth of country.
INTRODUCTION OF MONEY
To overcome above disadvantages of barter system,
money came into picture in 3000 BC.
Money is any object or record, that is generally accepted
as payment for goods and services and repayment of
debts in a given country or socio-economic context.
CURRENCY
Money most often took the form of gold or silver coins,
though history shows that many assets have from time to
time served as money.
In economics, the term currency can refer to a particular
currency of a country, for example, the Euro, which
comprise the physical aspects of a nation's money
supply.
EVOLUTION OF CURRENCY
Carry assets i.e., coins for trade was found risky for
traders, as it was heavy.
So to overcome this, In 17th century Bank of England
came with innovation, called paper currency and which
was accepted by wide traders around the world.
LIST OF CIRCULATING CURRENCIES
There are 182 current official currencies of the 192
United Nations member states, one UN observer state,
nine partially recognized states, one unrecognized state,
and 36 dependencies.
U.S. Dollar and Euro are dominant global reserve
currencies.
COMMON CURRENCY
A common currency (also known as currency union) is
where two or more states share the same currency,
though without there necessarily having any further
integration such as an Economic and Monetary Union,
which has in addition a customs union and a single
market.
TYPES OF CURRENCY UNION
There are three types of currency unions:
Informal - unilateral adoption of foreign currency.
Formal - adoption of foreign currency by virtue of
bilateral or multilateral agreement with the issuing
authority, sometimes supplemented by issue of local
currency in currency peg regime
Formal with common policy - establishment by multiple
countries of common monetary policy and issuing
authority for their common currency
CAN ANYONE MAKE A
GUESS WHICH WAS FIRST
CURRENCY UNION IN AND
AROUUND GLOBE?
FIRST COMMON CURRENCY CONCEPT
The CFP franc (called the franc in everyday use) is the
currency used in the French overseas collectivities of
French Polynesia, New Caledonia and Wallis and
Futuna.
It was created in December 1945.
EAST CARIBBEAN DOLLAR
The East Caribbean dollar (sign:EC$; code: XCD) is
the currency of eight of the nine members of the
Organization of Eastern Caribbean States (the one
exception being the British Virgin Islands).
It has existed since 1965, being the successor to the
British West Indies dollar.
Six of the states using the EC$ are independent states:
Antigua and Barbuda, Dominica, Grenada, Saint Kitts
and Nevis, Saint Lucia, and Saint Vincent and the
Grenadines.
EURO
The euro (sign: €; code: EUR) is the official currency of
the euro zone: 17 of the 27 Member States of the
European Union (EU).
The euro zone consists of Austria, Belgium, Cyprus,
Estonia, Finland, France, Germany, Greece, Ireland,
Italy, Luxembourg, Malta, the Netherlands, Portugal,
Slovakia, Slovenia and Spain
The euro is the second largest reserve currency as well as the
second most traded currency in the world after the U.S. dollar.
The name euro was officially adopted on 16 December 1995.
The euro was introduced to world financial markets as an
accounting currency on 1 January 1999.
Euro coins and banknotes entered circulation on 1 January
2002.
THE ECB(EUROPEAN CENTRAL BANK) IN
FRANKFURT, GERMANY, IS IN CHARGE OF THE EURO
ZONE'S MONETARY POLICY
OTHERS
Indian rupee is common currency for 3 countries India,
Nepal, Bhutan.
South African rand is common for Lesotho, Namibia,
South Africa and Swaziland.
Russian ruble is common for Abkhazia, Russia and
South Ossetia.
New Zealand dollar is common for New
Zealand, Tokelau, Ross Dependency, Cook Islands, Niue
and Pitcairn Islands
Many others.
CURRENCY UNION AROUND WORLD
On March 16, 2009, in connection with the April 2009
G20 summit, called for a supranational reserve currency
as part of a reform of the global financial
system( currency union for trade).
This was supported by Central bank.
It is existing mechanisms that traditionally has worked
very well in conducting international business.
Euro as an example of a supranational currency
successfully implemented by a union of nations with
disparate languages, cultures, and economies.
BENEFITS
Global currency would not suffer from inflation, which,
in extreme cases, has had disastrous effects for
economies.
In t5he present days of globalization, Global currency
would make conducting international business more
efficient and would encourage Foreign direct investment
(FDI).
Currency union, there is a possibility that some of the
countries that now have a patchy track record of inflation
control and exchange rate management could benefit
substantially.
Labor mobility.
The absence of distinct currencies also removes
exchange rate risks.
It would maximize economic efficiency to have the
entire region share a single currency.
Price parity.
The cost of trade in bonds, equity, and banking assets
will decrease.
A study has found that the introduction of the currency
has had a positive effect on tourism.
The introduction of the currency union will increase
trade by 5% to 10% as per study.
DIFFICULTIES
Limited additional benefit with extra cost.
Economically incompatible nations.
Wealth redistribution.
Usury.
Inadequacy of region-level resource pooling
mechanisms.
Institutions required for forming and managing a
currency union.
Weaknesses in the financial sectors of many countries.
CONCLUSION
Theabove analysis concludes that there are more
benefits than difficulties in having common
currency globally.
REFERENCES
http://www.adb.org/Documents/ERD/Working_Papers/w
p012.pdf
http://en.wikipedia.org/wiki/World_currency
http://en.wikipedia.org/wiki/Euro
http://en.wikipedia.org/wiki/money
http://en.wikipedia.org/wiki/barter
THANK YOU
