FXstreet.com (Barcelona) - To a great extent, the Euro was introduced to achieve a higher level of economic integration within the EU’s single market. The single currency was seen as a complement to the single market, serving to increase price transparency and eliminate currency exchange costs. According to the Analyst Team at Goldman Sachs, It was widely expected to provide a small but material boost to intra-Euro area trade and the experience since 1999 has been broadly consistent with this: intra-Euro area trade since the advent of the Euro has increased, but not dramatically.”
The modest effect of the Euro on trade has been well documented in the literature. The main explanation for the lack of impact has been that ‘the job had already been done’ thanks to the dismantling of trade barriers within the wider European Union that was already set up in 1992 with the establishment of the Single Market and the pre-existing European exchange rate mechanism (ERM), which – with some notable exceptions – acted to reduce FX volatility. “Combined, these measures have probably produced the bulk of the boost to intra-EU flows, leaving little further to be achieved by monetary union.” the Team adds.
The modest effect of the Euro on trade has been well documented in the literature. The main explanation for the lack of impact has been that ‘the job had already been done’ thanks to the dismantling of trade barriers within the wider European Union that was already set up in 1992 with the establishment of the Single Market and the pre-existing European exchange rate mechanism (ERM), which – with some notable exceptions – acted to reduce FX volatility. “Combined, these measures have probably produced the bulk of the boost to intra-EU flows, leaving little further to be achieved by monetary union.” the Team adds.
