The Euro Currency Stability Goal Theory And The Results Of The Research

Since the birth of Euro in1999, the European Central Bank System has set up itsprimary task for maintaining price stability. In order to keep Euro stable,“MaastrichtTreaty” and “Stability and Growth Pact” have legislated a few clauses.In this thesis, proceeding with clauses in “Maastricht Treaty” and “Stability andGrowth Pact”, the author applies IS-LM-FE model in international economic andtheories of relations between central bank independence and monetary stability, whichincludes time inconsistency theory, political business cycle theory, conservative centralbanker theory, consign-agent theory, in order to analyze the necessity of making strictstandards and keep central bank independent to realize price stability. Based on theabove theoretical analysis, combining the Euro internal value and external valuedevelopment graph, the author makes a research about Euro’s stability and finds out theinternal value of Euro is stable and the external value of Euro is stable in a period ofeconomic prosperity. However, the external value of Euro fluctuates widely in a periodof economic depression.Then, the author makes a further research about the external value instability of Euro.The outcomes indicate that the economic asymmetry in European Union countries, thefree rider behavior of these countries and the dilemma of regulation innovation in EuroArea are respectively potential, essential and fundamental causes resulting in instabilityto the external value of Euro. At the end of the thesis, the author gives descriptions ofEuropean Central Bank independence status, the reforms which are being done now andwhich are waiting to be implemented. Based on those descriptions, a prediction isoffered to determine the future of Euro internal value and external value stability.