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THE CHRIS PARASKEVOPOULOS MEMORIAL CONFERENCE Athenian Policy Forum and York University

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

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THE CHRIS PARASKEVOPOULOS MEMORIAL CONFERENCE Athenian Policy Forum and York University

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  1. 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

  2. OUTLINE • Brief Evaluation of the Global Economy • Currency Markets • Discussion of the Dollar Weakness • The Role of the Euro • China and India

  3. 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.

  4. The Nature of Crises • Currency Crises 2. Banking Crises 3. Financial Crises 4. Economic Recessions

  5. Major Trends • Trends in Global GDP • Trends in Global Trade • Trends in Global Consumption • Trends in Global Investment

  6. Global GDP Growth Figure 1: Global Outlook (Real GDP; percent change from a year ago)

  7. U.S., Euro, and Japan GDP Growth Figure 2: Global Outlook (Real GDP; percent change from a year ago)

  8. Remarks • Real Global Economies Appear Stable • How are Global Currencies Performing?

  9. : Key Statistics for 2006 Source: CMF World Factbook 2006

  10. Possible Causes of Dollar Decline • Large Balance of Payments Deficits • Easy Monetary Policy • Easy Fiscal Policy • Concerns about stagflation

  11. Balance of Current Account

  12. Real Interest Rates

  13. Fundamentals or Inflation?

  14. Fundamentals or Inflation?

  15. Price of Gold During 2 Centuries

  16. Current Choices and Conclusions 1. The EU and Monetary Integration 2. The US and NAFTA • The Role of Japan, China and India: Favoring the US Dollar? • Mundell on an Asian Currency • Trend Towards Fewer Currencies

  17. Figure 6: Euro and Partners versus U.S. and Partners (various scenarios) Source: Frankel and Chinn (2005) and Modified by the Authors

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