The Global Economy

The Global Economy
Kathleen Joy T. De Guzman

CAS Faculty
Global Economy
ØAlso referred to as “world
economy”
ØRefers to the international
exchange of goods and
services
ØIt may also mean as the free
movement of goods, capital,
services, technology, and
information
Economic Globalization Defined
• Generally, economic globalization refers to the expanding interdependence of
world economies.
• According to the United Nations (as cited in Shangquan, 2000), economic
globalization refers to the increasing interdependence of world economies as a
result of the growing scale of cross-border trade of commodities and services, flow
of international capital, and wide and rapid spread of technologies.
• Economic globalization refers to the increasing integration of economies around
the world, particularly through the movement of goods, services, and capital across
borders. (International Monetary Fund, 2008)
• Historically, economic globalization can be traced from the time when there was
economic movement in Asia, Africa, and Europe through the Silk Road, a network
of trade routes that connected the East, particularly China, and the West.
(Brazalote, 2019)
Global Economy or Economic Globalization
ØIt is concerned with globalization of production, finance,
markets, technology, organizational regimes,
institutions, corporations and labor.
ØIt is expanding since the emergence of trans-national

trade and increased exponentially due to the increase
rate of communication and technology.
ØThe creation of world trade organizations made

countries cut down trade barriers and open up their
current accounts and capital accounts.
Two Types of Economies Associated with
Economic Globalization
1. Protectionism. A policy of systematic government intervention in foreign
trade with the objective of encouraging domestic production. This
encouragement involves giving preferential treatment to domestic producers
and discriminating against foreign competitors. (McAleese, 2007)
2. Trade Liberalization. It is the removal or reduction of restrictions or barriers

on the free exchange of goods between nations. These barriers include tariffs,
such as duties and surcharges, and nontariff barriers, such as licensing rules
and quotas. Economists often view the easing or eradication of these
restrictions as steps to promote free trade. (Banton, 2021)
MARKET
INTEGRATION
ØPrices among different location or related goods follow the same
pattern over a long period of time, then market integration exist.
ØWhen group of prices often move proportionally to each other and
when this relation is very clear among different markets, then
market is integrated.
ØThe market integration is an indicator how much different markets
are related to each other.
Role of International Financial Institutions in
the Creation of Global Economy
International Financial Institutions (IFI)
ØInternational Financial Institutions are chartered by more than one
country and therefore are subjects to international law.
ØThe owners or shareholders are generally national governments,
although other international institutions and other organizations
occasionally figure as shareholder.
ØMost of the prominent IFIs are creations of multiple nations, although
some bilateral financial institutions (created by two countries) exist are
technically IFIs.
The International Financial Institutions (IFIs) are:
A. International Monetary Fund (IMF)
B. Multilateral Development Banks (MDBs) which include:
a. World Bank Group
b. African Development Bank
Regional
c. Asian Development Bank
Development
d. Inter-American Development Bank Banks (RDB)
e. European Bank for Reconstruction and Development
Membership Composition of IFIs
• Only sovereign countries are admitted as
member owner
• Broad country membership to include
borrowing deve lo ping c o u ntr ie s and
developed donor countries
• Membership in regional development
banks include countries around the world as
members
• It has its own independent legal and
operational states
MAIN OBJECTIVES
• IMF provides temporary financial assistance to member countries to help ease
balance of payments adjustments.
• MDBs provide financing for development to developing countries through:
üLong term loans (with maturities of up to 20 years) at interest rates way below
market rates. Funding comes from international capital markets and relend to
borrowing government in developing countries.
üVery long-term loans (sometimes called credits with maturities of 30-40
years) at interest rates below market rates. Funding for loans come from
direct contributions by government in the donor countries.
üGrant financing by some MDBs for technical
assistance advisory service or project preparation.

The Global Economy

Uploaded by

Copyright:

Available Formats

The Global Economy

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

The Global Economy

Uploaded by

Copyright:

Available Formats

The Global Economy

Kathleen Joy T. De Guzman

ØIt is expanding since the emergence of trans-national

ØThe creation of world trade organizations made

2. Trade Liberalization. It is the removal or reduction of restrictions or barriers

You might also like