GLOBALIZATION - Encompasses internationally

- Movement and exchange of economic, coordinated practices and

technological, sociocultural, and regulations regarding
political forces. environmental protection
- The increased interconnectedness and - Refers to the global
interdependence of people and country. environmental challenges which
include population growth, food
CONCEPTS OF GLOBALIZATION security,poverty, etc.
1. ECONOMIC GLOBALIZATION
- The realization of a global IMPACTS OF GLOBALIZATION
common market, based on the
freedom of goods and capital. 1. CULTURAL LOSS
- The development of trade - Since we adapt different
systems within transnational cultures and ideas from other
actors such as corporations or nations, the original culture of
NGOs the country is sometimes
2. FINANCIAL GLOBALIZATION forgotten.
- The rise of a global financial 2. ECONOMIC INEQUALITY
system with international - There is modernization and
exchanges and monetary beautification of the country but
changes. the poor are forgotten
- The emergence of under or - Rich get richer, poor get poorer
unregulated foreign exchange 3. POLITICAL CONFLICTS
and speculative markets. - Politicians try to protect their
3. POLITICAL GLOBALIZATION own countries interest thus
- The creation of a world sometimes result to political
government. conflicts.
- The development and growing - Ex. Russia vs Ukraine (NATO
influence of international vs USSR)
organizations such as the UN or 4. ENVIRONMENTAL CRISIS
WHO means governmental - Because of modernization and
action takes place at an globalization our environment is
international level. deteriorating
4. SOCIOCULTURAL - Big corporation contribute to
GLOBALIZATION the pollution
- nations adopt principles, beliefs,
and customs of other nations. ECONOMIC GLOBALIZATION
- Interpenetration of culture - is a historical progress
- Two kinds of power: - the result of human innovations and
Soft power- influences other technological progress.
nations through their culture. - It refers to the increasing integration of
Hard power- influences other economies around the world,
nations through military forces. particularly through the movement of
5. TECHNOLOGICAL goods, services, and capital across
GLOBALIZATION borders.
- Development of a global Economic Growth- an increase in the size of a
telecommunications country's economy over a period of time. The
infrastructure and greater data size of an economy is typically measured by the
flow even into the world's most total production of goods and services in the
remote areas. economy, which is called gross domestic
6. ECOLOGICAL GLOBALIZATION product (GDP).
INTERNATIONAL TRADE banks would maintain fixed
- allows countries to expand their markets exchanged rates between their
and access goods and services that currencies and the dollar.
otherwise may not have been available - collapsed in the 1970s but
domestically - resulting to a competitive created a lasting influence on
market. international currency exchange
- The world economies have become and trade through its
more intertwined through globalization development of financial
and international trade is a major part of institutions.
most economies.
INTERNATIONAL TRADING SYSTEMS: ➢ International Financial Institutions
● GOLD STANDARD 1. World Bank
- Emerged in 1867 - international financial
- UK, US, and other European institution that provides
nations adopted the gold loans to developing
standard at an International countries for capital
Monetary Conference in Paris. programs.
- currency prices and fixed - Responsible for funding
exchanged rate were all based postwar reconstruction
on the value of gold projects and promotes
- It is a currency measurement long-term economic
system that uses gold as a way development.
to set the value of money. It 2. International Monetary Fund
ensures that currency under a - The global lender of last
gold-standard system can be resort to prevent
exchanged for gold. individual countries
➢ “The Great from spiraling into
Depression” credit crises.
- started in 1929 and - To ensure the stability
lasted for 10 years of the international
- worst and longest monetary system - the
economic downfall system of exchange
- caused by the gold rates and international
standard because of payments that enables
limited circulation of countries and their
money. citizens to transact with
● FIAT CURRENCIES each other.
- Current economic currency ➔ After Bretton Woods, various countries
- value is determined by their cost committed themselves to further global
relative to other currencies. economic integration through the
- This system allows governments General Agreement on Tariffs and
to freely and actively manage Trade (GATT) in 1947 - main purpose
their economies by increasing or was to reduce tariffs and other
decreasing their money in hindrances to free trade.
circulation as they fit.
● BRETTON WOODS SYSTEM FINANCIAL SYSTEM
- earliest system used to control - A financial system is a set of
the value of money between institutions, such as banks, insurance
different countries. companies, and stock exchanges, that
- Under this agreement, countries permit the exchange of funds.
- promised that their central - System that allows the transfer of
 money between savers and borrowers. International Monetary Fund, central
banks, government treasuries and
monetary authorities, the World Bank,
and major private international banks.

TWO MAIN FUNCTIONAL

COMPONENTS
1. Global Capital Market
- Financial market that
brings buyers and
sellers together to trade
stocks, bonds,
COMPONENTS OF FINANCIAL SYSTEM currencies, and other
1. FINANCIAL INSTITUTIONS financial instruments.
- act as intermediaries between 2. Foreign Exchange Market
the lender and the borrower - A global marketplace
when providing financial where currencies are
services. traded and determines
2. FINANCIAL MARKETS the exchange rates of
- places where the exchange of currencies to another.
assets occurs with borrowers
and lenders, such as stocks, INSTITUTIONS OF GLOBAL
bonds, derivatives, and FINANCIAL SYSTEM
commodities. ● International Institutions
3. FINANCIAL INSTRUMENTS 1. IMF- Keeps account of
- These can include cash, shares international balance of
of stock (representing payment of members
ownership), bonds, options, and states, also acts as a
futures. lender of last resort
4. FINANCIAL SERVICES 2. World Bank- Provide
- provide investors a way of funding, take up credit
managing assets and offer risk and offer financial
protection against systemic risk. favorable terms to
Banks, insurance companies, development projects in
and investment services would developing countries
be considered financial services. 3. WTO- Negotiates
5. CURRENCY (MONEY) international trade
- is a form of payment to agreements, settles trade
exchange products, services,and disputes.
investments and holds value to ● Government Institutions
society. - Financial ministries, tax
GLOBAL FINANCIAL SYSTEM authorities, central banks,
- refers to those financial institutions and securities and exchange
regulations that act on the international commissions, etc.
level, as opposed to those that act on a ● Private Participants
national or regional level. - Commercial banks, pension
- is basically a broader regional system funds, hedge funds, etc.
that encompasses all financial ● Regional Institutions
institutions, borrowers, and lenders - NAFTA, ASEAN, etc.
within the global economy. In a global
view, financial systems include the KEY FEATURES OF FINANCIALIZATION
 ● Liberalization of capital
account.
● Capital flows increasingly
taking the form of FDI and
portfolio investment.
● Inflation targeting priority over
growth, jobs, health, or other
social outcomes to protect the
value of investment capital.

FOREIGN INVESTMENT
1. Foreign Direct Investment
- Occurs when a firm invests
directly in facilities to produce
and/or market a product in a
foreign country.
- Also occurs when a firm buys
an existing enterprise in a
foreign country.
2. Foreign Portfolio Investment
- Investment in foreign financial
instruments (e.g. bonds/stocks)
- Does not involve taking a
significant equity stake in a
foreign business entity.