Introduction to Finance

European Monetary Union 
(EMU) 
subset of European Union 
countries called eurozone members 
that have adopted the euro 
eurozone members 
European 
Monetary Union members that have 
adopted the euro as their common 
currency
euro 
offi
cial coins and paper 
currency of the eurozone member 
countries

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6.3 Currency Exchange Markets and Rates
135
The European Central Bank, as well as the central banks of EU members not part of the 
eurozone, have engaged in easy money policies to attempt to stimulate economic growth and 
to reduce unemployment rates. The ECB, like the Fed, has engaged in quantitative easing 
programs, including buying bonds issued by eurozone countries having fi nancial troubles in 
order to help stabilize the costs of government debt fi nancing. And, while the Fed targeted the 
short-term federal funds rate at 0.00 to 0.25 percent from late 2008 through late 2015, the ECB 
continues to target short-term interest rates near zero and has even experimented with negat-
ive interest rate policies. In a negative interest rate situation, the purchaser of a government 
security pays the government more than the interest received on the security for the “right” to 
hold the security.
Concern has been expressed that the EU may face new economic problems and pos-
sibly a new fi nancial crisis because of the United Kingdom’s June, 2016 decision to leave 
the EU. The United Kingdom, consisting of England, Northern Ireland, Scotland, and Wales, 
has major trade and fi nancial arrangements with countries remaining in the EU that could be 
disrupted by its decision to leave the EU. These also is concern about what would happen if 
other EU-member countries tried to leave the EU. It will be interesting to follow how the EU 
responds and adapts to these new economic and fi nancial challenges.