...include inflation, or in real terms, which are adjusted for inflation.”(www.investopedia.com). As mentioned by (Bigman2002), globalization has had a major impact on the economic growth of most developing countries except a few countries in South Asia and Latin America. In East Asia, countries such as China and Japan underwent rates of economic growth during the last 30 years. This resulted in the well-being of a large portion of their population. As confirmed by the IMF, international trade has improved the world economy heavily. “Integration into the world economy has proven a powerful means for countries to promote economic growth, development, and poverty reduction. Over the past 20 years, the growth of world trade has averaged 6 per cent per year, twice as fast as world output.” (IMF Staff 2001). When an economy is open to foreign investment, sustained economic growth can be achieved. This can be proven because no country over the past years has achieved economic success without being open to the rest of the world (IMF Staff 2001). Globalization and Foreign Direct Investment supports economic growth directly and also indirectly. The reason it supports growth indirectly is because local individuals and companies can learn from the developed foreign partners known as absorptive capacity. This may add value to local companies which also helps in business efficiency and...
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...INTRODUCTION Objective The general objectives of this study are to describe recent trade problems and examine why these problems are related to, and affected by exchange rates. The study first examines the exchange rate and how it is determined. The study will explore, in detail, the agencies that determine these rates. This study will also present the pros and cons of different prices of goods and services in different countries. Specifically, this paper: (1) defines recent trade problems and how they are affected by the exchange rate; (2) describes the steps taken within the agencies that determine the exchange rates; (3) examines the impact of these rates, both good and bad; (4) analyzes the costs of similar goods in the U.S. and in foreign markets; (5) discusses the pros and cons of the exchange rate and how it affects trade; (6) examines various exchange rate systems: floating, fixed, and dirty floating. Limitations of the Study The topics of exchange rate and trade both have a variety of factors that cause changes. As with any study that attempts to explore current developments in the economy, it is hard to keep information current. It is also virtually impossible to report on the status of every single government that is involved in the exchange market. One of the limitations of this study is to report on up-to-date values of currency while choosing a sample of governments...
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...CRITICAL QUESTIONS AND DISCUSSION Note: Questions from the end of the chapters can also be used for discussion questions Chapter 2: Foundations of Modern Trade Theory: Comparative Advantage Critical Thinking and Discussion Questions: QUESTION 1: Mercantilism is a bankrupt theory that has no place in the modern world. Discuss. QUESTION 2: Is free trade fair? Discuss. QUESTION 3: Unions in developed nations often oppose imports from low-wage countries and advocate trade barriers to protect jobs from what they often characterize as “unfair” import competition. Is such competition “unfair”? Do you think that this argument is in the best interests of (a) the unions, (b) the people they represent, and/or (c) the country as a whole? QUESTION 4: What are the potential costs of adopting a free trade regime? Do you think governments should do anything to reduce these costs? What? QUESTION 5: The world’s poorest countries are at a competitive disadvantage in every sector of their economies. They have little to export. They have no capital; their land is of poor quality; they often have too many people given available work opportunities; and they are poorly educated. Free trade cannot possibly be in the interests of such nations! Discuss. Chapter 3: Sources of Comparative Advantage Critical Questions: QUESTION 1: In a world of zero transportation costs, no trade barriers, and nontrivial differences between nations with regard to factor conditions, firms must...
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...Abstract Economic globalization has augmented worldwide trade, investments, technology transfer, and communication as well the competition and dependencies between nations. The growth of liberalization in telecommunications and Internet has accentuated these effects creating a truly global village. The observable heterogeneity of the global growth process led to a large body of empirical and theoretical research with the main conclusion that the hypothesis of absolute convergence formerly predicted by growth economists does not hold. That is, not all countries do automatically converge to the same steady state position. As a result, depending on a number of factors, countries would tend to cluster on certain "conditional convergent equilibria". These will depend on essentially the investment rate, human capital endowment, the R&D intensity and integration into world markets. Further, empirical results strongly support the hypothesis that only countries with sufficient abilities to innovate or acquire new technologies are able to converge in terms of their productivity levels and income. Keywords: Globalization, Economic Growth, Innovation Globalization (Cheal, 1997) defines economic globalization as, A process of increasing economic integration between two countries, bringing about the emergence of a global marketplace, or a single world market (p 647). Despite the fact that globalization has been in the making for the past couple of decades. Ever since...
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... You need to discuss amongst yourselves how the duties of the assignment will be divided and the manner in which it will be presented to me. Working together will ensure that all parts will be done well and on time. Question 1: Overview of the Macroeconomy: Interpretation (25 marks) Please discuss the current state of the macroeconomy in Canada. In particular please discuss the growth rates and gross domestic product, the unemployment rate and lastly inflation. Please discuss how these variables compare to both the short and long run averages. In providing answers, please provide where data was obtained. You can use the internet or more authorative sources such as the Bank of Canada, Statistical Canada (Cansim) dataset or the IMF/World Bank websites. After you have ascertained this information, please make a determination as to whether the economy is at its long run equilibrium level (full employment), or whether it is in a recessionary or expansionary gap. (Hint: the economy is rarely at its long run level). Question 2: Legislative Overview (15 Marks) Please discuss 2 important institutions in Canada responsible for conducting fiscal and monetary policy, name the Department of Finance and the Bank of Canada. What are the roles of each and what are each responsible for obtaining? What are the responsibilities of each institution and what tools do they have at their disposable to impact the economy? Can you say that their objections are in tandem with one...
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... You need to discuss amongst yourselves how the duties of the assignment will be divided and the manner in which it will be presented to me. Working together will ensure that all parts will be done well and on time. Question 1: Overview of the Macroeconomy: Interpretation (25 marks) Please discuss the current state of the macroeconomy in Canada. In particular please discuss the growth rates and gross domestic product, the unemployment rate and lastly inflation. Please discuss how these variables compare to both the short and long run averages. In providing answers, please provide where data was obtained. You can use the internet or more authorative sources such as the Bank of Canada, Statistical Canada (Cansim) dataset or the IMF/World Bank websites. After you have ascertained this information, please make a determination as to whether the economy is at its long run equilibrium level (full employment), or whether it is in a recessionary or expansionary gap. (Hint: the economy is rarely at its long run level). Question 2: Legislative Overview (15 Marks) Please discuss 2 important institutions in Canada responsible for conducting fiscal and monetary policy, name the Department of Finance and the Bank of Canada. What are the roles of each and what are each responsible for obtaining? What are the responsibilities of each institution and what tools do they have at their disposable to impact the economy? Can you say that their objections are in tandem with one...
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...International Lending and Financial Crisis By Alicia Jones ECON610, Spring 2012, Session 8 Dr. Fereidoon Shahrokh May 25, 2012 Abstract In this paper we will be discussing the pros and cons of international lending practices and how it affects borrowing countries capital flows and their trading. While some countries go through financial crisis, international lending may be hard to secure due to the fact that there are associated risks. Because of these risks, lenders do not want to lose their money on a country who is struggling and/or in debt. We will also take a look at how the international financial crisis affects industrial countries and developing nations in which they will not be able to obtain financing for future or current projects. There are many reasons why international financing causes crises which one reason is caused by over lending and over borrowing. We will discuss exogenous shocks and exchange rates and how these can affect the entire world and what happens when countries with huge debts negatively affect short term debt financing for foreigners. Keywords: Financial crises, debt, lending practices. Exogenous, risks INTRODUCTION The goal of this paper is to show a broad picture of the differences between how international capital moves through the investing and lending process, through both lenders and borrowers. This depends on whether countries are in a financial crisis or not...
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...\ eighth edition Global Business Today CharlesW. L Hill University of Washington McGraw-Hill Irwin contents PREFACE xiii PART ONE Chapter One Introduction 4 What Is Globalization? 6 The Globalization of Markets 6 The Globalization of Production 7 The Emergence of Global Institutions 9 Drivers of Globalization 11 Declining Trade and Investmen t Barriers 11 The Role of Technological Change 14 The Changing Demographics of the Global Economy 16 The Changing World Output and World Trade Picture 16 The Changing Foreign Direct Investment Picture 18 The Changing Nature of the Multinational Enterprise 19 The Changing World Order 22 The Global Economy of the Twenty-First Century 23 The Globalization Debate 24 Antiglobalization Protests 24 Globalization, Jobs, and Income 26 Globalization, Labor Policies, and the Environment 28 Globalization and,National Sovereignty 29 Globalization and the World's Poor 30 Managing in the Global Marketplace 31 Key Terms 33 Chapter Summary 33 Critical Thinking and Discussion Questions 34 Research Task 34 Closing Case: Legal Outsourcing 35 Introduction and Overview 2 Globalization 3 PART TWO Chapter Two Country Differences 36 National Differences in Political Economy 37 Opening Case: Ghana: An African Dynamo 37 Introduction 38 Political Systems 39 Collectivism and Individualism 39 Democracy and Totalitarianism 42 Economic Systems 44 Market Economy 44 Command Economy 45 Mixed Economy 45 Legal Systems 46 Different Legal Systems 46 Differences...
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...Abstract Over the past few decades, the global scenario has changed considerably with increased interdependence amongst nations and economies. This intertwining amongst nations and sharing of ideas and technology has been termed as “Globalization”. Globalization has been a buzzword of late, with heated discussions about its pros and cons. Some consider it to be a blessing for mankind while others take it as a curse. For some it has brought about material prosperity while others have become unemployed due to it. This paper tries to analyse the effect of Increased International Trade and Globalisation on the US economy. The first section discusses the pros and cons of Globalization while the second section discusses how globalization has lead to increased foreign trade. Thereafter, it discusses the effect of globalisation and increased foreign trade on the American economy. Introduction Trade is believed to have taken place throughout much of recorded human history, whether as barter or in exchange of currency. Till the 1800’s, trade was limited due to difficulties in transportation, communication and restrictive trade policies. However, in the mid 19th century, with advent of free trade and nation advantage concepts, trade started to pick up (Daniels & Sullivan, International Business and Operation). Although international trade has been present throughout much of history, for example Silk Route, its economic, social, and political importance have increased in recent...
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...IWhat is International Marketing? Marketing a product or service across national boundaries in order to satisfy the needs of customers and the objectives of the organization. Different Terms: Multidomestic marketing: adapting product and marketing programs to each foreign market independently. Global marketing: marketing activities in multiple country markets are coordinated and integrated. Foreign marketing: loosely refers to marketing a product in a market outside the home market. International Marketing Environments Global Economic Environment Cultural Environment International Marketing Global Competitive Environment Political/Regulatory Environment Systems Global Systems Global Financial Systems International Monetary Systems and Foreign Exchange Market Global/regional Trading Systems (WTO, EU, NAFTA, ASEAN,...) Importance of International Marketing • • • • World trade has risen from $2 trillion to $18 trillion in last three decades. International trade grows twice as fast as domestic trade. Global marketing is a “must” for firms to achieve sustained growth. Marketing success will be defined on a global scale. Domestic and International Trade Growth Percentage of Growth 12% 10% 8% 6% 4% 2% 0% Year International Trade Domestic Trade Financial Statistics Yearbook Source: International 2011, International Monetary Fund, Washington D. C. Uniqueness...
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...Abstract This goal of this research is to find out if Islamic Banking is a better alternative to the Western, Conventional Banking. The information provided will reveal various Islamic Banking principles that would have prevented previous major economic crises and if applied globally today could prevent a major economic collapse. Islamic Banking is banking system based on Shari'a (Islamic) Law on which it developed its unique characteristics that will be discussed in this paper. Shari'a Law does not allow the use of Interest (Riba), trading in financial risk, and investing in businesses that are considered unlawful according to the Quraan and Islamic scholars. Shari'a law in Islamic Banking is meant to promote economic and development through the means of disciplined investing, fair risk sharing, and profit or loss sharing (Warde, 2000). The literature that will be examined in this paper will show that Islamic Banking is a good alternative to the current global banking system, however, it will be near impossible to revamp the existing banking system and replace it with Islamic Banking because it goes against many of the core principles of conventional banking that the global economy is built on which has been around for decades. Brief History The main goal of Islamic banks was to promote social and economical welfare in society through guiding investors and offering financial assistance to businesses by engaging in profit sharing transactions (Warde, 2000). Islamic banks...
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...Globalization is an ever evolving entity that has and will continue to change the way we, as individuals, will interact with one another. “Globalization, as a concept, refers both to the "shrinking" of the world and the increased consciousness of the world as a whole. It is a term used to describe the changes in societies and the world economy that are the result of dramatically increased cross-border trade, investment and cultural exchange.” (NEW, 2010) Globalization integrates the world through economical, societal and cultural ideas. It displays the allocation of a country’s ideas, languages and popular culture to the rest of the world. Globalization is not a new idea. For thousands of years, people, and later corporations, have been buying and selling to each other from afar, such as through the famous Silk Road across Central Asia that appended China and Europe during the Middle Ages. Multiple features of the current craze of Globalization are similar to those prevailing before the outbreak of the First World War in 1914. Driven by intercontinental policies, Globalization has opened economies domestically and internationally. Ever since the Second World War, and more importantly in the past two decades, many governments have adopted free market economic systems, increasing their productive potential and creating new opportunities for intercontinental trade and investment. Free market economic systems not only allow for economic growth, but the growth of political...
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...Questions for Test 2 ECO 320 Economics of Development Chapter 1 1.Developing countries share some features (low levels of income, etc.), but they are quite different in many respects. Explain what we mean by “institutions” and how is it that developing countries different in institutional development. How would the differences in the development of institutions make it more difficult to formulate policies for development and theories of development? 2.Is there a fixed set of prerequisites for development? Explain. Chapter 2 3.Comment on the following statement: The level and growth rate of real GDP per capita can be a misleading indicator of development. At the same time, countries that experience sustained increases in real GDP per capita over time will tend to be more developed. 4.Why is an understanding of what “development” means crucial to policy formulation in developing nations? Why do you think a country may have difficulties in agreeing on a rough definition of development? 5.Why do we use “purchasing power parity” measures when comparing incomes across countries? 6.Suppose that you had to explain this graph to someone who is not a “visual learner” – he just doesn’t get pictures. You have to explain every feature of the graph using words. 7.What are the components of the Human Development Index? What are some strengths and weaknesses of the HDI as a comparative measure of human welfare? 8.Discuss the Millennium Development Goals...
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...version: January 2014 Abstract We review the events that led to the May 2010 and July 2011 bailout agreements. We interpret the bailouts as outcomes of political-economy equilibria. We argue that these equilibria were likely not on the Pareto frontier, and sketch political-economy arguments for why collective policy making in the Euro area may lead to suboptimal outcomes. Most modern sovereign debt crises have been managed in Washington, DC, through the combined e¤orts of the International Monetary Fund (IMF) and the US government. A distinctive feature of the crisis that has engulfed European sovereign-debt markets since the fall of 2009 has been that the IMF has played only a supporting (albeit important) role, while the management of the crisis has been driven by European institutions: the council of …nance ministers (ECOFIN), the European Council (EC, made up by all the heads of government of the European Union) and the European Central Bank (ECB). To the extent that the IMF is largely a technocratic institution (though of course not entirely immune from political in‡ uence) while ECOFIN and the EC are made up of politicians, one may expect the management of the crisis by the EC to be more a¤ected by electoral concerns. Furthermore, since there are 27 members to the EC, representing countries with potentially di¤erent interests, one may expect that bargaining and compromise will play a greater role than in cases where the two players are simply the Ardagna: Goldman Sachs; Peterborough...
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...climate change at far lower levels than traditional programs of country-based development assistance. The prospects for dealing with such global challenges will depend at least in part on new collective financing mechanisms. In this paper, we examine four categories of existing resource-mobilization options, including (1) transportation levies; (2) currency and financial transaction taxes; (3) capitalization of IMF Special Drawing Rights (SDRs); and (4) the sale, mobilization, or capitalization of IMF gold. In the end, we recommend that willing governments utilize a modest portion of their existing SDR allocations to capitalize a third-party financing entity. This entity would offer bonds on international capital markets backed by its SDR reserves. The proceeds would back private investment in climate-mitigation projects in developing countries that might otherwise lack adequate financing. This approach could mobilize up to $75 billion at little or no budgetary cost for contributing governments. Any limited budgetary costs could be offset by using excess proceeds from recent IMF gold sales. In our view, capitalizing a small portion of existing global assets—SDRs with a small back-up reserve of the income from gold already sold—to finance programs that deal with global public goods and bads makes eminent sense. I. INTRODUCTION The global community faces a number of critical common challenges, including climate...
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