Role of the EURO in international financial markets

This thesis investigate the role and the effects of the Euro in the international financial andtrading markets since 1999 when its first operation in international financial markets. Othertwo sub-issues which was under debate in this study are that competition between Euro anddollar and other assessment of the Euro and Euro area intended for EU-10 and Turkey.Theoretical substructure of this study is the theory of optimum currency area which was basedon the Robert Mundell?s study ?A Theory of Optimum Currency Areas? issued in 1961. Inthis context, as explained in related literature in this study we stated that Euro area isn?t anoptimum currency area but we sighted this case is not too much important aspect ofsignificance of the Euro in the international financial and trading markets. We show the placeand share of the Euro area and the EU in the world trade in a comparison with some of theimportant countries. In the same way, we show that Euro?s share, comparing to dollar?s, inthe international foreign reserves. We indicate that, Euro has 25 percent of the world foreignreserves. Furthermore, we indicated the use of the Euro outside the euro area as a nominalanchor, vehicle currency and saving instrument. This case definitely show that, Euro?s got aninternational currency status. Additionally, when look at the general inclinations in theinternational financial markets, it is apearig that use of Euro rising more clearly in EastEurope, West Asian, Middle East and North Africa, but not insomuch in America and EastAsian and dollar dominance holding in these areas. So we thought this condition can be markthat forerunner of the bi-polar international financial system that shaped on Euro-dollar.Finally, we indicated that in EU enlargement process Euro has a potential to become morestronger and to have more important situation in international financial markets. Without adoubt, the use of Euro instead of old national curriencies of euro area countries has been fixedeven in Turkey. Moreover, in both private and official use of Euro it can be seen that Euro getportions from both curriencies of the countries outside the EU and the US dollar. But inTurkey, on the macroecomomic indicators euro generally does not have a possitive ornegative effect importantly.Keywords: Euro, monetary union, optimum currency areas, Euro area, international financialmarkets