An Analysis of the European Exchange Rate Mechanism: The case of Sweden

Introduction Sweden joined the European Union on January 1, 1995, but unlike most member countries, Sweden does not adopt the euro. Indeed, Sweden has not even joined the European Exchange Rate Mechanism (ERM). Why did not Sweden want to join the euro area, and whether they made the right choice. In the first half of this report I will look at various Swedish international trade and economic indicators. In particular, I examined the difference between real effective exchange rate, GDP, trade balance, current account and savings investment.

Since the current economic development reflects the substantial improvement of the Swedish economy after the 1991-93 crisis, Sweden can easily obtain a qualification to become a member of the third phase of the EU Economic and Monetary Union in euros I can do it. Theoretically, according to the provisions of the European Monetary Union, Sweden has no obligation to join because it has not got an exception through any protocol or treaty (not Denmark or Britain). Nevertheless, the Swedish government decided in 1997 to join a common currency from 1 January 1999. This choice was made using legal loopholes and did not intentionally participate in the European exchange rate mechanism. The European Central Bank currently tolerates this movement, but the European Central Bank warns that the new EU member countries will not do so.

The currency equivalent to the pierced tire is the uniform exchange rate. It is a rare occurrence, but it is devastating when it happens. In the 1980s, the European Community established the European Exchange Rate Mechanism (ERM). The government understands that fluctuations in these currencies are interfering with trade between countries and leads to management of corporate risk and fluctuations in the exchange rate between the currencies of the participating countries does not exceed 6% It shows that. If the volatility is close to 6%, that country has an obligation to take action.

In 1969, the plan to develop a common European currency began with a ballet report. After the establishment of the European Monetary System (EMS) and the Exchange Rate Mechanism (ERM) in 1979, European markets began to become more unified in order to unify European currencies, thereby eliminating the possibility of fluctuations between them , Eventually constituting a single European market. The only problem that occurs in a single market is the exchange rate risk and the transaction costs associated with it. Therefore, the concept of common currency is beginning to be regarded as an excellent solution to these problems.