eco research

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[Type the document title]

MIT SCHOOL OF MANAGEMENT Page 1

Role of Economics in Global Business

ManagementSubmitted By:

Vivek Chaware - 23

Atul Gosavi -04

Nitin Jain-70

Aditya Pachpor-68Nikita Madaan-36

Deepika Deshmukh-40

Akash Parande-57


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Introduction:

An economy consists of the economic system of a country or other area;

the labour, capital and land resources; and the manufacturing, trade,

distribution, and consumption ofgoods and services of that area. An economy

may also be described as a spatially limited and social network

where goods and services are exchanged according

to demand and supply between participants by barter or a medium of

exchange with a credit or debit value accepted within the network.

A given economy is the end result of a process that involves its technological

evolution, history and social organization, as well as its geography, natural

resource endowment, and ecology, as main factors. These factors give context,

content, and set the conditions and parameters in which an economy functions.
http://en.wikipedia.org/wiki/Economic_systemhttp://en.wikipedia.org/wiki/Otherhttp://en.wikipedia.org/wiki/Wage_labourhttp://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Land_(economics)http://en.wikipedia.org/wiki/Resourceshttp://en.wikipedia.org/wiki/Manufacturinghttp://en.wikipedia.org/wiki/Consumption_(economics)http://en.wikipedia.org/wiki/Goods_(economics)http://en.wikipedia.org/wiki/Social_networkhttp://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Demandhttp://en.wikipedia.org/wiki/Supply_(economics)http://en.wikipedia.org/wiki/Barterhttp://en.wikipedia.org/wiki/Medium_of_exchangehttp://en.wikipedia.org/wiki/Medium_of_exchangehttp://en.wikipedia.org/wiki/Credithttp://en.wikipedia.org/wiki/Debithttp://en.wikipedia.org/wiki/Value_(economics)http://en.wikipedia.org/wiki/Technological_evolutionhttp://en.wikipedia.org/wiki/Technological_evolutionhttp://en.wikipedia.org/wiki/Historyhttp://en.wikipedia.org/wiki/Social_organizationhttp://en.wikipedia.org/wiki/Geographyhttp://en.wikipedia.org/wiki/Natural_resourcehttp://en.wikipedia.org/wiki/Natural_resourcehttp://en.wikipedia.org/wiki/Ecologyhttp://en.wikipedia.org/wiki/Ecologyhttp://en.wikipedia.org/wiki/Natural_resourcehttp://en.wikipedia.org/wiki/Natural_resourcehttp://en.wikipedia.org/wiki/Geographyhttp://en.wikipedia.org/wiki/Social_organizationhttp://en.wikipedia.org/wiki/Historyhttp://en.wikipedia.org/wiki/Technological_evolutionhttp://en.wikipedia.org/wiki/Technological_evolutionhttp://en.wikipedia.org/wiki/Value_(economics)http://en.wikipedia.org/wiki/Debithttp://en.wikipedia.org/wiki/Credithttp://en.wikipedia.org/wiki/Medium_of_exchangehttp://en.wikipedia.org/wiki/Medium_of_exchangehttp://en.wikipedia.org/wiki/Barterhttp://en.wikipedia.org/wiki/Supply_(economics)http://en.wikipedia.org/wiki/Demandhttp://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Social_networkhttp://en.wikipedia.org/wiki/Goods_(economics)http://en.wikipedia.org/wiki/Consumption_(economics)http://en.wikipedia.org/wiki/Manufacturinghttp://en.wikipedia.org/wiki/Resourceshttp://en.wikipedia.org/wiki/Land_(economics)http://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Wage_labourhttp://en.wikipedia.org/wiki/Otherhttp://en.wikipedia.org/wiki/Economic_system


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Objectives:

1. To study what is economics2. To study global business management3. To study role of economics in global business management4. To study how economics help in managing Global Business


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Contents:

1.

What is economics?

2. How economy ruled different Eras3. What is Global Business Management4. Role of economics in GBM5. GBM and Economics6. Conclusion7. Bibliography


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What is Economy?

The world economy, or global economy, generally refers to

the economy, which is based on economies of all of the world'scountries,

national economies. Also global economy can be seen as the economy ofglobal

society and national economies as economies of local societies, making the

global one. It can be evaluated in various kind of ways. For instance, depending

on the model used, the valuation that is arrived at can be represented in acertain currency, such as 2006 US dollars or 2005 Euros.

It is inseparable from the geography and ecology of Earth, and is therefore

somewhat of a misnomer, since, while definitions and representations of the

"world economy" vary widely, they must at a minimum exclude any

consideration of resources or value based outside of the Earth. For example,

while attempts could be made to calculate the value of currently unexploited

mining opportunities in unclaimed territory in Antarctica, the same

opportunities on Mars would not be considered a part of the world economy

even if currently exploited in some wayand could be considered of latent

value only in the same way as uncreated intellectual property, such as a

previously unconceived invention.

Beyond the minimum standard of concerning value in production, use, and

exchange on the planet Earth, definitions, representations, models, and

valuations of the world economy vary widely.

It is common to limit questions of the world economy exclusively to human

economic activity, and the world economy is typically judged in monetary

terms, even in cases in which there is no efficient market to help valuate certain

goods or services, or in cases in which a lack of independent research or
http://en.wikipedia.org/wiki/Economyhttp://en.wikipedia.org/wiki/Countrieshttp://en.wikipedia.org/wiki/Global_societyhttp://en.wikipedia.org/wiki/Global_societyhttp://en.wikipedia.org/wiki/Currencyhttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/Euroshttp://en.wikipedia.org/wiki/Earthhttp://en.wikipedia.org/wiki/Earthhttp://en.wikipedia.org/wiki/Antarcticahttp://en.wikipedia.org/wiki/Marshttp://en.wikipedia.org/wiki/Intellectual_propertyhttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Intellectual_propertyhttp://en.wikipedia.org/wiki/Marshttp://en.wikipedia.org/wiki/Antarcticahttp://en.wikipedia.org/wiki/Earthhttp://en.wikipedia.org/wiki/Earthhttp://en.wikipedia.org/wiki/Euroshttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/Currencyhttp://en.wikipedia.org/wiki/Global_societyhttp://en.wikipedia.org/wiki/Global_societyhttp://en.wikipedia.org/wiki/Countrieshttp://en.wikipedia.org/wiki/Economy


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government cooperation makes establishing figures difficult. Typical examples

are illegal drugs and other black market goods, which by any standard are a part

of the world economy, but for which there is by definition no legal market of

any kind.

However, even in cases in which there is a clear and efficient market to

establish a monetary value, economists do not typically use the current or

official exchange rate to translate the monetary units of this market into a single

unit for the world economy, since exchange rates typically do not closely

reflect worldwide value, for example in cases where the volume or price of

transactions is closely regulated by the government.

How Economy Ruled the Different Eras:

19801990 - United States and Japan lead expansion

At exchange rates, the economic output of 112 markets expanded by $10.7

trillion from 1980 to 1990. The economic output of 34 markets contracted by

$276.9 billion from 1980 to 1990. The five largest contributors to global output

contraction are Argentina at 24%, Saudi Arabia at 17%, Nigeria at

11%, Venezuela at 8%, and Vietnam at 8%. At purchasing power parity, the

economic output of 145 markets expanded by $12.1 trillion from 1980 to 1990.

The economic output of 2 markets contracted by $3.5 billion from 1980 to

1990. The two contributors to global output contraction are Lebanon at 70%

and Libya at 30%. The following two tables are lists of twenty largest

economies by incremental GDP from 1980 to 1990 by International Monetary

Fund.
http://en.wikipedia.org/wiki/Illegal_drug_tradehttp://en.wikipedia.org/wiki/Underground_economyhttp://en.wikipedia.org/wiki/Worldhttp://en.wikipedia.org/wiki/Exchange_rateshttp://en.wikipedia.org/wiki/Argentinahttp://en.wikipedia.org/wiki/Saudi_Arabiahttp://en.wikipedia.org/wiki/Nigeriahttp://en.wikipedia.org/wiki/Venezuelahttp://en.wikipedia.org/wiki/Vietnamhttp://en.wikipedia.org/wiki/Purchasing_power_parityhttp://en.wikipedia.org/wiki/Lebanonhttp://en.wikipedia.org/wiki/Libyahttp://en.wikipedia.org/wiki/International_Monetary_Fundhttp://en.wikipedia.org/wiki/International_Monetary_Fundhttp://en.wikipedia.org/wiki/International_Monetary_Fundhttp://en.wikipedia.org/wiki/International_Monetary_Fundhttp://en.wikipedia.org/wiki/Libyahttp://en.wikipedia.org/wiki/Lebanonhttp://en.wikipedia.org/wiki/Purchasing_power_parityhttp://en.wikipedia.org/wiki/Vietnamhttp://en.wikipedia.org/wiki/Venezuelahttp://en.wikipedia.org/wiki/Nigeriahttp://en.wikipedia.org/wiki/Saudi_Arabiahttp://en.wikipedia.org/wiki/Argentinahttp://en.wikipedia.org/wiki/Exchange_rateshttp://en.wikipedia.org/wiki/Worldhttp://en.wikipedia.org/wiki/Underground_economyhttp://en.wikipedia.org/wiki/Illegal_drug_trade


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19902000 - United States dominates expansion


trillion from 1990 to 2000. The economic output of 29 markets contracted by

$94.2 billion from 1990 to 2000. The five largest contributors to global output

contraction are Italy at 37%, Finland at 18%, Bulgaria at 9%, Algeria at 8%, and

the Democratic Republic of Congo at 5%.

At purchasing power parity, the economic output of 148 markets expanded by

$16.9 trillion from 1990 to 2000. The economic output of 3 markets contracted

by $17.8 billion from 1990 to 2000. The three contributors to global output

contraction are Bulgaria at 64%, the Democratic Republic of Congo at 29%

and Sierra Leone at 7%.

20002006 United States still leads, but China is catching up


trillion from 2000 to 2006. The five largest contributors to global output

expansion are the United States at 20%, China at 9%, Germany at 6%,

the United Kingdom at 6%, and France at 5%. The economic output of 4

markets contracted by $94.2 billion from 2000 to 2006. The three largest

contributors to global output contraction are Japan at 80%, Argentina at 19%,

and the Uruguay at 1%.

At purchasing power parity, the economic output of 180 markets expanded by

$19.2 trillion from 2000 to 2006. The five largest contributors to global output

expansion are the United States at 18%, China at 17%, India at 6%, Japan at

5%, and Russia at 4%.
http://en.wikipedia.org/wiki/Exchange_rateshttp://en.wikipedia.org/wiki/Italyhttp://en.wikipedia.org/wiki/Finlandhttp://en.wikipedia.org/wiki/Bulgariahttp://en.wikipedia.org/wiki/Algeriahttp://en.wikipedia.org/wiki/Democratic_Republic_of_Congohttp://en.wikipedia.org/wiki/Purchasing_power_parityhttp://en.wikipedia.org/wiki/Bulgariahttp://en.wikipedia.org/wiki/Democratic_Republic_of_Congohttp://en.wikipedia.org/wiki/Sierra_Leonehttp://en.wikipedia.org/wiki/Exchange_rateshttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Argentinahttp://en.wikipedia.org/wiki/Uruguayhttp://en.wikipedia.org/wiki/Purchasing_power_parityhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Purchasing_power_parityhttp://en.wikipedia.org/wiki/Uruguayhttp://en.wikipedia.org/wiki/Argentinahttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Exchange_rateshttp://en.wikipedia.org/wiki/Sierra_Leonehttp://en.wikipedia.org/wiki/Democratic_Republic_of_Congohttp://en.wikipedia.org/wiki/Bulgariahttp://en.wikipedia.org/wiki/Purchasing_power_parityhttp://en.wikipedia.org/wiki/Democratic_Republic_of_Congohttp://en.wikipedia.org/wiki/Algeriahttp://en.wikipedia.org/wiki/Bulgariahttp://en.wikipedia.org/wiki/Finlandhttp://en.wikipedia.org/wiki/Italyhttp://en.wikipedia.org/wiki/Exchange_rates


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2007China leads expansion

The economic output by nominal GDP of 183 markets expanded by $6.4 trillion

during 2007. China accounted for 12% while the United States accounted for

10%, Germany accounted for 6%, and the United Kingdom accounted for 6% of

the global output expansion.

2008credit crisis begins

The economic output of 171 markets expanded by $5.8 trillion during

2008. China accounted for one-sixth of the global output expansion. The

economic output of 11 markets contracted by $267 billion during 2008.

The United Kingdom accounted for one-half while South Korea accounted for

two-fifth of the global output contraction. Though the crisis first affected most

countries in 2008, it was not yet deep enough to reverse growth.

2009Credit crisis spreads

At exchange rates, the economic output of 127 markets contracted by $4.1

trillion during 2009. The United Kingdom was the largest victim accounting for

12% while Russia accounted for 11% and Germany accounted for 8% of the

global output contraction. The economic output of 56 markets expanded by

$767.1 billion during 2009. China accounted for 61% while Japan accounted for

20% and Indonesia accounted for 4% of the global output expansion.

At purchasing power parity, the economic output of 79 markets contracted by

$1.4 trillion during 2009. The United States was the largest victim accounting

for 18% while Japan accounted for 17% and Russia accounted for 10% of the

global output contraction. The economic output of 104 markets expanded by

$1.5 trillion during 2009. China accounted for 56% while India accounted for

17% and Indonesia accounted for 3% of the global output expansion.
http://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/South_Koreahttp://en.wikipedia.org/wiki/Exchange_rateshttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Indonesiahttp://en.wikipedia.org/wiki/Purchasing_power_parityhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indonesiahttp://en.wikipedia.org/wiki/Indonesiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Purchasing_power_parityhttp://en.wikipedia.org/wiki/Indonesiahttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Exchange_rateshttp://en.wikipedia.org/wiki/South_Koreahttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/China


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2010recovery:


trillion during 2010. The five largest contributors to global output expansion

are China at 17%, the United States at 10%, Brazil at 9%, Japan at 8%,

and India at 5%. The economic output of 35 markets contracted by $338.5

billion during 2010. The five largest contributors to global output contraction

are France at 22%, Italy at 18%, Spain at 17%, Venezuela at 10%,

and Germany at 7%.

At purchasing power parity, the economic output of 169 markets expanded by$4.2 trillion during 2010. The five largest contributors to global output

expansion are China at 25%, theUnited States at 13%, India at 10%, Japan at

5%, and Brazil at 4%. The economic output of 14 markets contracted by $17.8

billion during 2010. The five largest contributors to global output contraction

are Greece at 67%, Venezuela at 19%, Romania at 5%, Haiti at 3%,

and Croatia at 2%.

IMF's economic outlook for 2010 noted that banks faced a "wall" of maturing

debt, which presents important risks for the normalization of credit conditions.

There has been little progress in lengthening the maturity of their funding and,

as a result, over $4 trillion in debt is due to be refinanced in the next 2 years. `

The following two tables are lists of twenty largest economies by incremental

GDP from 2000 to 2010 by International Monetary Fund.

20102016 The BRICs lead economic growth.

At exchange rates, the economic output of the world is expected to expand by

US$28.7 trillion, 20 trillion from 2010 to 2016.[11]At purchasing power parity,

the economic output of 183 markets is expected to expand by US$29.1 trillion,

25 trillion from 2010 to 2016. The following two tables are predictive lists of
http://en.wikipedia.org/wiki/Exchange_rateshttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Brazilhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/Italyhttp://en.wikipedia.org/wiki/Spainhttp://en.wikipedia.org/wiki/Venezuelahttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Purchasing_power_parityhttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Brazilhttp://en.wikipedia.org/wiki/Greecehttp://en.wikipedia.org/wiki/Venezuelahttp://en.wikipedia.org/wiki/Romaniahttp://en.wikipedia.org/wiki/Haitihttp://en.wikipedia.org/wiki/Croatiahttp://en.wikipedia.org/wiki/International_Monetary_Fundhttp://en.wikipedia.org/wiki/International_Monetary_Fundhttp://en.wikipedia.org/wiki/BRIChttp://en.wikipedia.org/wiki/Exchange_rateshttp://en.wikipedia.org/wiki/World_Economy#cite_note-10http://en.wikipedia.org/wiki/World_Economy#cite_note-10http://en.wikipedia.org/wiki/World_Economy#cite_note-10http://en.wikipedia.org/wiki/Purchasing_power_parityhttp://en.wikipedia.org/wiki/Purchasing_power_parityhttp://en.wikipedia.org/wiki/World_Economy#cite_note-10http://en.wikipedia.org/wiki/Exchange_rateshttp://en.wikipedia.org/wiki/BRIChttp://en.wikipedia.org/wiki/International_Monetary_Fundhttp://en.wikipedia.org/wiki/Croatiahttp://en.wikipedia.org/wiki/Haitihttp://en.wikipedia.org/wiki/Romaniahttp://en.wikipedia.org/wiki/Venezuelahttp://en.wikipedia.org/wiki/Greecehttp://en.wikipedia.org/wiki/Brazilhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Purchasing_power_parityhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Venezuelahttp://en.wikipedia.org/wiki/Spainhttp://en.wikipedia.org/wiki/Italyhttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Brazilhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Exchange_rates


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forty largest economies by incremental GDP from 2010 to 2016 by International

Monetary Fund.

Statistical indicators

Economy

GDP (GWP) (gross world product): (purchasing power parity exchangerates)$59.38 trillion (2005 est.), $51.48 trillion (2004), $23 trillion (2002)

GDP (GWP) (gross world product):[15](market exchange rates) $60.69trillion (2008)

GDPreal growth rate: 3.2% (2008), 3.1% p.a. (200007), 2.4% p.a. (199099), 3.1% p.a. (198089)

GDP per capita: purchasing power parity $9,300, 7,500 (2005 est.),$8,200, 6,800 (92) (2003), $7,900, 5,000 (2002)

World median income: purchasing power parity $1,041, 950 (1993)[16] GDPcomposition by sector: agriculture: 4%; industry: 32%; services: 64%

(2004 est.)

Inflation rate (consumer prices): developed countries 1% to 4%typically; developing countries 5% to 60% typically; national inflation rates

vary widely in individual cases, from declining prices

in Japan to hyperinflation in several Third World countries (2003)

Derivatives outstanding notional amount: $273 trillion, 200 trillion (end ofJune 2004), $84 trillion, DM 75 trillion (end-June 1998) ([12])

Global debt issuance: $5.187 trillion, 3 trillion (2004), $4.938 trillion, 3.98trillion (2003), $3.938 trillion (2002) (Thomson Financial League Tables)
http://en.wikipedia.org/wiki/International_Monetary_Fundhttp://en.wikipedia.org/wiki/International_Monetary_Fundhttp://en.wikipedia.org/wiki/Gross_domestic_producthttp://en.wikipedia.org/wiki/Gross_world_producthttp://en.wikipedia.org/wiki/Gross_domestic_producthttp://en.wikipedia.org/wiki/Gross_world_producthttp://en.wikipedia.org/wiki/World_Economy#cite_note-14http://en.wikipedia.org/wiki/World_Economy#cite_note-14http://en.wikipedia.org/wiki/Medianhttp://en.wikipedia.org/wiki/World_Economy#cite_note-15http://en.wikipedia.org/wiki/World_Economy#cite_note-15http://en.wikipedia.org/wiki/World_Economy#cite_note-15http://en.wikipedia.org/wiki/Inflationhttp://en.wikipedia.org/wiki/Developed_countryhttp://en.wikipedia.org/wiki/Developing_countryhttp://en.wikipedia.org/wiki/Economy_of_Japanhttp://en.wikipedia.org/wiki/Hyperinflationhttp://en.wikipedia.org/wiki/Third_worldhttp://en.wikipedia.org/wiki/Derivative_(finance)http://en.wikipedia.org/wiki/Deutsch_markhttp://www.bis.org/publ/otc_hy0412.htmhttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Thomson_Financial_League_Tableshttp://en.wikipedia.org/wiki/Thomson_Financial_League_Tableshttp://en.wikipedia.org/wiki/Debthttp://www.bis.org/publ/otc_hy0412.htmhttp://en.wikipedia.org/wiki/Deutsch_markhttp://en.wikipedia.org/wiki/Derivative_(finance)http://en.wikipedia.org/wiki/Third_worldhttp://en.wikipedia.org/wiki/Hyperinflationhttp://en.wikipedia.org/wiki/Economy_of_Japanhttp://en.wikipedia.org/wiki/Developing_countryhttp://en.wikipedia.org/wiki/Developed_countryhttp://en.wikipedia.org/wiki/Inflationhttp://en.wikipedia.org/wiki/World_Economy#cite_note-15http://en.wikipedia.org/wiki/Medianhttp://en.wikipedia.org/wiki/World_Economy#cite_note-14http://en.wikipedia.org/wiki/Gross_world_producthttp://en.wikipedia.org/wiki/Gross_domestic_producthttp://en.wikipedia.org/wiki/Gross_world_producthttp://en.wikipedia.org/wiki/Gross_domestic_producthttp://en.wikipedia.org/wiki/International_Monetary_Fundhttp://en.wikipedia.org/wiki/International_Monetary_Fund


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Global equity issuance: $505 billion, 450 billion (2004), $388 billion. 320billion (2003), $319 billion, 250 trillion (2002) (Thomson Financial League

Tables)

Employment

World GDP per capita between 15002003

GDP increase, 19901998 and 19902006, in major countries.
http://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Thomson_Financial_League_Tableshttp://en.wikipedia.org/wiki/Thomson_Financial_League_Tableshttp://en.wikipedia.org/wiki/Thomson_Financial_League_Tableshttp://en.wikipedia.org/wiki/GDPhttp://en.wikipedia.org/wiki/GDPhttp://en.wikipedia.org/wiki/File:Gdp_accumulated_change.pnghttp://en.wikipedia.org/wiki/File:Gdp_accumulated_change.pnghttp://en.wikipedia.org/wiki/File:World_GDP_per_capita_1500_to_2003.pnghttp://en.wikipedia.org/wiki/File:World_GDP_per_capita_1500_to_2003.pnghttp://en.wikipedia.org/wiki/File:Gdp_accumulated_change.pnghttp://en.wikipedia.org/wiki/File:Gdp_accumulated_change.pnghttp://en.wikipedia.org/wiki/File:World_GDP_per_capita_1500_to_2003.pnghttp://en.wikipedia.org/wiki/File:World_GDP_per_capita_1500_to_2003.pnghttp://en.wikipedia.org/wiki/File:Gdp_accumulated_change.pnghttp://en.wikipedia.org/wiki/File:Gdp_accumulated_change.pnghttp://en.wikipedia.org/wiki/File:World_GDP_per_capita_1500_to_2003.pnghttp://en.wikipedia.org/wiki/File:World_GDP_per_capita_1500_to_2003.pnghttp://en.wikipedia.org/wiki/File:Gdp_accumulated_change.pnghttp://en.wikipedia.org/wiki/File:Gdp_accumulated_change.pnghttp://en.wikipedia.org/wiki/File:World_GDP_per_capita_1500_to_2003.pnghttp://en.wikipedia.org/wiki/File:World_GDP_per_capita_1500_to_2003.pnghttp://en.wikipedia.org/wiki/GDPhttp://en.wikipedia.org/wiki/GDPhttp://en.wikipedia.org/wiki/Thomson_Financial_League_Tableshttp://en.wikipedia.org/wiki/Thomson_Financial_League_Tableshttp://en.wikipedia.org/wiki/Stock


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Unemployment rate: 8.7% (2009 est.). 30% (2007 est.) combinedunemployment and underemployment in many non-industrialized countries;

developed countries typically 4%12% unemployment.

Industrial production growth rate: 3% (2002 est.

Energy

Yearly electricity production: 15,850,000 GWh (2003 est.), 14,850,000

GWh (2001 est.) Yearly electricity consumption: 14,280,000 GWh (2003 est.), 13,930,000

GWh (2001 est.)

Oil production: 79,650,000 bbl/d (12,663,000 m3 /d) (2003 est.),75,460,000 barrels per day (11,997,000 m3/d) (2001)

Oil consumption: 80,100,000 bbl/d (12,730,000 m3 /d) (2003 est.),

76,210,000 barrels per day (12,116,000 m3

/d) (2001) Oilproved reserves: 1.025 trillion barrel (163 km) (2001 est.) Natural gas production: 2,569 km (2001 est.) Natural gas consumption: 2,556 km (2001 est.) Natural gas proved reserves: 161,200 km (1 January 2002)

Cross-border

Yearly exports:$12.4 trillion, 8.75 trillion (2009 est.) Exports commodities: the whole range of industrial and agricultural

goods and services

Exports partners: US 12.7%, Germany 7.1%, China 6.2%, France 4.4%,Japan 4.2%, UK 4.1% (2008)
http://en.wikipedia.org/wiki/Unemploymenthttp://en.wikipedia.org/wiki/Underemploymenthttp://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Underemploymenthttp://en.wikipedia.org/wiki/Unemployment


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Yearly imports:$12.29 trillion, 9 trillion (2009 est.) Imports commodities: the whole range of industrial and agricultural

goods and services

Imports

partners: China 10.3%, Germany 8.6%, US 8.1%, Japan 5%

(2008)

Debtexternal:$56.9 trillion, 40 trillion (31 December 2009 est.)

Gift economy

Yearly economic aid recipient: Official Development Assistance (ODA)$50 billion, 39.5 billion

Communications

Telephones main lines in use: 843,923,500 (2007)

4,263,367,600 (2008)

Telephonesmobile cellular: 3,300,000,000 (Nov. 2007)[17] Internet Service Providers (ISPs): 10,350 (2000 est.) Internet users: 1,311,050,595 (January 18, 2008 [13] est.), 1,091,730,861

(December 30, 2006 [14] est.), 604,111,719 (2002 est.)

Transport

Transportation infrastructure worldwide includes:

Airports Total: 49,973 (2004)

Roadways(in kilometres)
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Total: 32,345,165 km Paved: 19,403,061 km Unpaved: 12,942,104 km (2002)

Railways Total: 1,122,650 km includes about 190,000 to 195,000 km of electrified

routes of which 147,760 km are in Europe, 24,509 km in the Far East,

11,050 km in Africa, 4,223 km in South America, and 4,160 km in North

America.

Military expenditures dollar figure: aggregate real expenditure on arms

worldwide in 1999 remained at approximately the 1998 level, about $750

billion, about 1/2 of which was the United States (1999)

Global Business

Ever wonder why food costs rise when gas prices spike? Ever question why

U.S. politicians worry when other countries talk of going bankrupt? Ever

wonder why you cant get a good interest rate on your savings account? All of

these phenomena can be explained through economics.

Economics is the study of the production and consumption of goods and the

transfer of wealth to produce and obtain those goods. Economics explains how

people interact within markets to get what they want or accomplish certain

goals. Since economics is a driving force of human interaction, studying it often

reveals why people and governments behave in particular ways.

There are two main types of economics: macroeconomics and microeconomics.

Microeconomics focuses on the actions of individuals and industries, like the

dynamics between buyers and sellers, borrowers and lenders. Macroeconomics,

on the other hand, takes a much broader view by analyzing the economic

activity of an entire country or the international marketplace.
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A study of economics can describe all aspects of a countrys economy, such as

how a country uses its resources, how much time labourers devote to work and

leisure, the outcome of investing in industries or financial products, the effect of

taxes on a population, and why businesses succeed or fail.

Global business or International business is a term used to collectively

describe all commercial transactions

(private and governmental, sales, investments, logistics,and transportation) that

take place between two or more regions, countries and nations beyond their

political boundary. Usually, private companies undertakesuch transactions for profit; governments undertake them for profit and

for political reasons.[1]It refers to all those business activities which involves

cross border transactions of goods, services, resources between two or more

nations. Transaction of economic resources include capital, skills, people etc.

for international production of physical goods and services such as finance,

banking, insurance, construction etc.

A multinational enterprise (MNE) is a company that has a worldwide approach

to markets and production or one with operations in more than a country. An

MNE is often called multinational corporation (MNC) or transnational company

(TNC). Well known MNCs include fast food companies such

as McDonald's and Yum Brands, vehicle manufacturers such as General

Motors, Ford Motor Company and Toyota, consumer electronics companies

like Samsung, LG and Sony, and energy companies such

as ExxonMobil, Shell and BP. Most of the largest corporations operate in

multiple national markets.

Areas of study within this topic include differences in legal systems, political

systems, economic policy, language, accounting standards, labor

standards, living standards, environmental standards, local culture, corporate
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culture, foreign exchange market, tariffs, import and export regulations, trade

agreements, climate, education and many more topics. Each of these factors

requires significant changes in how individual business units operate from one

country to the next.

The conduct of international operations depends on companies' objectives and

the means with which they carry them out. The operations affect and are

affected by the physical and societal factors and the competitive environment.

Operations

Objectives: sales expansion, resource acquisition, riskminimizationMeans

Modes: importing and exporting, tourism and transportation, licensing and franchising, turnkey operations, management contracts, direct

investment and portfolio investments.

Functions: marketing, global manufacturing and supply chainmanagement, accounting, finance, human resources

Overlaying alternatives: choice of countries, organization and controlmechanisms

Physical and societal factors

Political policies and legal practices Cultural factors Economic forces Geographical influences
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Competitive factors

Major advantage in price, marketing, innovation, or other factors. Number and comparative capabilities ofcompetitors Competitive differences by countryThere has been growth in globalization in recent decades due

to the following eight factors:

Technology is expanding, especially in transportation and communications. Governments are removing international business restrictions. Institutions provide services to ease the conduct of international business. Consumers know about and want foreign goods and services. Competition has become more global. Political relationships have improved among some major economic powers. Countries cooperate more on transnational issues. Cross-national cooperation and agreements.Studying international business is important because:

Most companies are either international or compete with internationalcompanies.

Modes ofoperation may differ from those used domestically. The best way of conducting business may differ by country. An understanding helps you make better career decisions. An understanding helps you decide what governmental policies to support.Managers in international business must understand social science disciplines

and how they affect all functional business fields.
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Tom Travis, the managing partner of Sandler, Travis & Rosenberg, PA. and

international trade and customs consultant, uses the Six Tenets when giving

advice on how to globalize one's business. The Six Tenets are as follows:

1.Take advantage of trade agreements: think outside theborder

Familiarize yourself with preference programs and trade agreements. Read the fine print. Participate in the process. Seize opportunities when they arise.

2.Protect your brand at all costs You and your brand are inseparable. You must be vigilant in protecting your intellectual property both at

home and abroad.

You must be vigilant in enforcing your IP rights.

Protect your worldwide reputation by strict adherence to labor andhuman rights standards.

3.Maintain high ethical standards Strong ethics translate into good business. Forge ethical strategic partnerships. Understand corporate accountability laws. Become involved with the international business self-regulation

movement.

Develop compliance protocols for import and export operations. Memorialize your company's code of ethics and compliance practices

in writing.

Appoint a leader.


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International Economy

International economics is concerned with the effects upon economic activity of

international differences in productive resources and consumer preferences and

the institutions that affect them. It seeks to explain the patterns and

consequences of transactions and interactions between the inhabitants of

different countries, including trade, investment and migration.economies of

scale are benefits from bulk buying

International trade studies goods-and-services flows across internationalboundaries from supply-and-demand factors, economic

integration, international factor movements, and policy variables such

as tariffrates and trade quotas.

International finance studies the flow ofcapital across international financialmarkets, and the effects of these movements on exchange rates.

International monetary economics and macroeconomics studies money andmacro flows across countries.

International trade

Scope and methodology

The economic theory of international trade differs from the remainder of

economic theory mainly because of the comparatively limited international
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relative abundance of labour and capital (referred to as factor endowments). The

resulting theorem states that, on those assumptions, a country with a relative

abundance of capital would export capital-intensive products and import labour-

intensive products. The theorem proved to be of very limited predictive value,

as was demonstrated by what came to be known as the "Leontief Paradox" (the

discovery that, despite its capital-rich factor endowment, America was

exporting labour-intensive products and importing capital-intensive products)

Nevertheless the theoretical techniques (and many of the assumptions) used in

deriving the H-O model were subsequently used to derive further theorems.

The Stolper-Samuelson theorem, which is often described as a corollary of the

H-O theorem, was an early example. In its most general form it states that if the

price of a good rises (falls) then the price of the factor used intensively in that

industry will also rise (fall) while the price of the other factor will fall (rise). In

the international trade context for which it was devised it means that trade

lowers the real wage of the scarce factor of production, and protection from

trade raises it.

Another corollary of the H-O theorem is Samuelson's factor price equalisation

theorem which states that as trade between countries tends to equalise their

product prices, it tends also to equalise the prices paid to their factors of

production. Those theories have sometimes been taken to mean that trade

between an industrialised country and a developing country would lower the

wages of the unskilled in the industrialised country. (But, as noted below, that

conclusion depends upon the unlikely assumption that productivity is the same

in the two countries). Large numbers of learned papers have been produced in

attempts to elaborate on the H-O and Stolper-Samuelson theorems, and while

many of them are considered to provide valuable insights, they have seldom

proved to be directly applicable to the task of explaining trade (See also

the Rybczynski theorem
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Modern theory:

Modern trade theory moves away from the restrictive assumptions of the H-Otheorem and explores the effects upon trade of a range of factors, including

technology and scale economies. It makes extensive use ofeconometrics to

identify from the available statistics, the contribution of particular factors

among the many different factors that affect trade. The contribution of

differences of technology have been evaluated in several such studies. The

temporary advantage arising from a countrys development of a new technologyis seen as contributory factor in one study.

Other researchers have found research and development expenditure, patents

issued, and the availability of skilled labour, to be indicators of the

technological leadership that enables some countries to produce a flow of such

technological innovations and have found that technology leaders tend to export

hi-tech products to others and receive imports of more standard products fromthem. Another econometric study also established a correlation between country

size and the share of exports made up of goods in the production of which there

are scale economies. It is further suggested in that study that internationally-

traded goods fall into three categories, each with a different type of comparative

advantage:

goods that are produced by the extraction and routine processing ofavailable natural resources such as coal, oil and wheat, for which

developing countries often have an advantage compared with other

types of productionwhich might be referred to as "Ricardo goods";

low-technology goods, such as textiles and steel, that tend to migrateto countries with appropriate factor endowments - which might be

referred to as "Heckscher-Ohlin goods"; and,
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high-technology goods and high scale-economy goods, such ascomputers and aeroplanes, for which the comparative advantage arises

from the availability of R&D resources and specific skills and the

proximity to large sophisticated markets.

The effects of trade

Gains from trade

There is a strong presumption that any exchange that is freely undertaken

will benefit both parties, but that does not exclude the possibility that it maybe harmful to others. However (on assumptions that included constant

returns and competitive conditions) Paul Samuelson has proved that it will

always be possible for the gainers from international trade to compensate the

losers. Moreover, in that proof, Samuelson did not take account of the gains

to others resulting from wider consumer choice, from the international

specialisation of productive activities - and consequent economies of scale,and from the transmission of the benefits of technological innovation.

An OECD study has suggested that there are further dynamic gains resulting

from better resource allocation, deepening specialisation, increasing returns

to R&D, and technology spill over. The authors found the evidence

concerning growth rates to be mixed, but that there is strong evidence that a

1 per cent increase in openness to trade increases the level of GDP per capita

by between 0.9 per cent and 2.0 per cent. They suggested that much of the

gain arises from the growth of the most productive firms at the expense of

the less productive. Those findings and others have contributed to a broad

consensus among economists that trade confers very substantial net benefits,

and that government restrictions upon trade are generally damaging.
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Factor price equalisation

Nevertheless there have been widespread misgivings about the effects of

international trade upon wage earners in developed countries. Samuelsonsfactor price equalisation theorem indicates that, if productivity were the

same in both countries, the effect of trade would be to bring about equality

in wage rates. As noted above, that theorem is sometimes taken to mean that

trade between an industrialised country and a developing country would

lower the wages of the unskilled in the industrialised country. However, it is

unreasonable to assume that productivity would be the same in a low-wage

developing country as in a high-wage developed country. A 1999 study has

found international differences in wage rates to be approximately matched

by corresponding differences in productivity.

(Such discrepancies that remained were probably the result of over-valuation

or under-valuation of exchange rates, or of inflexibilities in labour markets.)

It has been argued that, although there may sometimes be short-term

pressures on wage rates in the developed countries, competition between

employers in developing countries can be expected eventually to bring

wages into line with their employees' marginal products. Any remaining

international wage differences would then be the result of productivity

differences, so that there would be no difference between unit labour costs in

developing and developed countries, and no downward pressure on wages in

the developed countries.

Terms of trade

There has also been concern that international trade could operate against the

interests of developing countries. Influential studies published in 1950 by the

Argentine economist Raul Prebisch and the British economist Hans


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Singer suggested that there is a tendency for the prices of agricultural

products to fall relative to the prices of manufactured goods; turning

the terms of trade against the developing countries and producing an

unintended transfer of wealth from them to the developed countries.

Their findings have been confirmed by a number of subsequent studies,

although it has been suggested that the effect may be due to quality bias in

the index numbers used or to the possession of market power by

manufacturers. The Prebisch/Singer findings remain controversial, but they

were used at the time - and have been used subsequently - to suggest that the

developing countries should erect barriers against manufactured imports in

order to nurture their own infant industries and so reduce their need to

export agricultural products. The arguments for and against such a policy are

similar to those concerning the protection of infant industries in general.

Infant industriesThe term "infant industry" is used to denote a new industry which has

prospects of becoming profitable in the long-term, but which would be

unable to survive in the face of competition from imported goods. That is a

situation that can occur because time is needed either to achieve

potential economies of scale, or to acquire potential learning

curve economies. Successful identification of such a situation followed bythe temporary imposition of a barrier against imports can, in principle,

produce substantial benefits to the country that applies ita policy known as

import substitution industrialization. Whether such policies succeed

depends upon governments skills in picking winners, and there might

reasonably be expected to be both successes and failures. It has been claimed

that South Koreas automobile industry owes its existence to initialprotection against imports,[23]but a study of infant industry protection in
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Turkey reveals the absence of any association between productivity gains

and degree of protection, such as might be expected of a successful import

substitution policy. .

Another study provides descriptive evidence suggesting that attempts at

import substitution industrialisation since the 1970s have usually failed, but

the empirical evidence on the question has been contradictory and

inconclusive. It has been argued that the case against import substitution

industrialisation is not that it is bound to fail, but that subsidies and tax

incentives do the job better. It has also been pointed out that, in any case,

trade restrictions could not be expected to correct the domestic market

imperfections that often hamper the development of infant industries

Trade policies

Economists findings about the benefits of trade have often been rejected by

government policy-makers, who have frequently sought to protect domestic

industries against foreign competition by erecting barriers, such

as tariffs and quotas, against imports. Average tariff levels of around 15 per

cent in the late 19th century rose to about 30 percent in the 1930s, following

the passage in the United States of the Smoot-Hawley Act. Mainly as the

result of international agreements under the auspices of the General

Agreement on Tariffs and Trade (GATT) and subsequently the World TradeOrganisation (WTO), average tariff levels were progressively reduced to

about 7 per cent during the second half of the 20th century, and some other

trade restrictions were also removed. The restrictions that remain are

nevertheless of major economic importance: among other estimates the

World Bank estimated in 2004 that the removal of all trade restrictions

would yield benefits of over $500 billion a year by 2015.
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The largest of the remaining trade-distorting policies are those concerning

agriculture. In the OECD countries government payments account for 30 per

cent of farmers receipts and tariffs of over 100 per cent are common. OECD

economists estimate that cutting all agricultural tariffs and subsidies by 50%

would set off a chain reaction in realignments of production and

consumption patterns that would add an extra $26 billion to annual world

income.

Quotas prompt foreign suppliers to raise their prices toward the domestic

level of the importing country. That relieves some of the competitive

pressure on domestic suppliers, and both they and the foreign suppliers gain

at the expense of a loss to consumers, and to the domestic economy, in

addition to which there is a deadweight loss to the world economy. When

quotas were banned under the rules of the General Agreement on Tariffs and

Trade (GATT), the United States, Britain and the European Union made use

of equivalent arrangements known as voluntary restraint agreements (VRAs)

or voluntary export restraints (VERs) which were negotiated with the

governments of exporting countries (mainly Japan) - until they too were

banned. Tariffs have been considered to be less harmful than quotas,

although it can be shown that their welfare effects differ only when there are

significant upward or downward trends in imports. Governments also

impose a wide range of non-tariff barriersthat are similar in effect to quotas,

some of which are subject to WTO agreements. A recent example has been

the application of the precautionary principle to exclude innovatory products
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International finance

Scope and methodology

The economics of international finance do not differ in principle from the

economics of international trade but there are significant differences of

emphasis. The practice of international finance tends to involve greater

uncertainties and risks because the assets that are traded are claims to flows

of returns that often extend many years into the future. Markets in financial

assets tend to be more volatile than markets in goods and services because

decisions are more often revised and more rapidly put into effect. There is

the share presumption that a transaction that is freely undertaken will benefit

both parties, but there is a much greater danger that it will be harmful to

others.

For example, mismanagement of mortgage lending in the United States led

in 2008 to banking failures and credit shortages in other developed

countries, and sudden reversals of international flows of capital have often

led to damaging financial crises in developing countries. And, because of the

incidence of rapid change, the methodology of comparative staticshas fewer

applications than in the theory of international trade, and empirical

analysis is more widely employed. Also, the consensus among economists

concerning its principal issues is narrower and more open to controversy

than is the consensus about international trade. Given by Mahendra


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Exchange rates and capital mobility

A major change in the organisation of international finance occurred in the

latter years of the twentieth century, and economists are still debating itsimplications. At the end of the second world war the national signatories to

the Bretton Woods Agreement had agreed to maintain their currencies each

at a fixed exchange rate with the United States dollar, and the United States

government had undertaken to buy gold on demand at a fixed rate of $35 per

ounce. In support of those commitments, most signatory nations had

maintained strict control over their nationals use of foreign exchange and

upon their dealings in international financial assets.

But in 1971 the United States government announced that it was suspending

the convertibility of the dollar, and there followed a progressive transition to

the current regime offloating exchange rates in which most governments no

longer attempt to control their exchange rates or to impose controls upon

access to foreign currencies or upon access to international financial

markets. The behaviour of the international financial system was

transformed. Exchange rates became very volatile and there was an extended

series of damaging financial crises. One study estimated that by the end of

the twentieth century there had been 112 banking crises in 93 countries

another that there had been 26 banking crises, 86 currency crises and 27

mixed banking and currency crises- many times more than in the previous

post-war years.

The outcome was not what had been expected. In making an influential case

for flexible exchange rates in the 1950s, Milton Friedman had claimed that if

there were any resulting instability, it would mainly be the consequence of

macroeconomic instability,[40]but an empirical analysis in 1999 found no

apparent connection. Economists began to wonder whether the expected
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advantages of freeing financial markets from government intervention were

in fact being realised.

Neoclassical theory had led them to expect capital to flow from the capital-

rich developed economies to the capital-poor developing countries - because

the returns to capital there would be higher. Flows of financial capital would

tend to increase the level of investment in the developing countries by

reducing their costs of capital, and the direct investment of physical capital

would tend to promote specialisation and the transfer of skills and

technology. However, theoretical considerations alone cannot determine the

balance between those benefits and the costs of volatility, and the question

has had to be tackled by empirical analysis.

A 2006 International Monetary Fund working paper offers a summary of the

empirical evidence. The authors found little evidence either of the benefits

of the liberalisation of capital movements, or of claims that it is responsible

for the spate of financial crises. They suggest that net benefits can be

achieved by countries that are able to meet threshold conditions of financial

competence but that for others, the benefits are likely to be delayed, and

vulnerability to interruptions of capital flows is likely to be increased.


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Globalization

The term globalization has acquired a variety of meanings, but in economic

terms it refers to the move that is taking place in the direction of complete

mobility of capital and labour and their products, so that the world's

economies are on the way to becoming totally integrated. The driving forces

of the process are reductions in politically-imposed barriers and in the costs

of transport and communication (although, even if those barriers and costs

were eliminated, the process would be limited by inter-country differences in

social capital).

It is a process which has ancient origins, which has gathered pace in the last

fifty years, but which is very far from complete. In its concluding stages,

interest rates, wage rates and corporate and income tax rates would become

the same everywhere, driven to equality by competition, as investors, wage

earners and corporate and personal taxpayers threatened to migrate in search

of better terms. In fact, there are few signs of international convergence of

interest rates, wage rates or tax rates. Although the world is more integrated

in some respects, it is possible to argue that on the whole it is now less

integrated than it was before the first world war., and that many middle-east

countries are less globalised than they were 25 years ago.

Of the moves toward integration that have occurred, the strongest has been

in financial markets, in which globalisation is estimated to have tripled since

the mid-1970s. Recent research has shown that it has improved risk-sharing,

but only in developed countries, and that in the developing countries it has

increased macroeconomic volatility. It is estimated to have resulted in net

welfare gains worldwide, but with losers as well as gainers. .

Increased globalisation has also made it easier for recessions to spread from

country to country. A reduction in economic activity in one country can lead

to a reduction in activity in its trading partners as a result of its consequent
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reduction in demand for their exports, which is one of the mechanisms by

which the business cycle is transmitted from country to country. Empirical

research confirms that the greater the trade linkage between countries the

more coordinated are their business cycles.

Globalisation can also have a significant influence upon the conduct of

macroeconomic policy. The Mundell-Fleming model and its extensions are

often used to analyse the role of capital mobility (and it was also used

by Paul Krugman to give a simple account of the Asian financial crisis). Part

of the increase in income inequality that has taken place within countries is

attributable - in some cases - to globalisation. A recent IMF report

demonstrates that the increase in inequality in the developing countries in

the period 1981 to 2004 was due entirely to technological change, with

globalisation making a partially offsetting negative contribution, and that in

the developed countries globalisation and technological change were equally

responsible.
http://en.wikipedia.org/wiki/Mundell-Fleminghttp://en.wikipedia.org/wiki/Paul_Krugmanhttp://en.wikipedia.org/wiki/Asian_financial_crisishttp://en.wikipedia.org/wiki/Asian_financial_crisishttp://en.wikipedia.org/wiki/Paul_Krugmanhttp://en.wikipedia.org/wiki/Mundell-Fleming


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BIBLIOGRAPHY:

- www.google.com- www.wikipedia.com

-

www.allbusiness.com

- www.economywatch.com
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