The Evaluation of Euro Exchange Rate

The launch of the euro on January 1, 1999 was the most important international financial event from the end of World War II. This new currency was accepted by many countries and challenge the role of the dollar as a vehicle currency. The relationship between macroeconomic volatility and economic growth is an old and important issue, from a theoretical and an empirical standpoint The evolution of exchange rates of each currency with the US dollar, in Euro area, depends at a great extent of the evolution of internal prices in each country in comparison With the United States, because the index of external prices of exports is usually in these Countries very much alike to the United States index of internal prices of exports. I analyzed the common European currency because: (1) is about as large an economic and trading unit as the United States; (2) has a large, well-developed, and growing financial market, which is increasingly free of controls; and (3) is expected to deliver a good inflation performance that will keep the value of the currency stable. The combined nations of EU is larger than the United States in terms of gross domestic product (GDP), global trade, and population.