Professional Documents
Culture Documents
STUDY BUDDY
Over
time,
the
liberalisation
of
trade
+
globalisation
has
allowed
for
greater
economic
integration
- Examples
of
economic
integration
are
the
EU,
NAFTA,
APEC,
AFTA
- Allows
for
greater
amount
of
intra-regional
trade
and
intra-industry
trade
o Ultimately
results
in
increased
investment
flows
and
standard
of
living
The
IMF
publishes
the
World
Economic
Outlook
-
classifying
countries
into
two
groups:
1. Advanced
Economies
-
high
levels
of
economic
development
with
average
incomes
over
$30,000
US/annum.
Generally
are
market
based
with
free
enterprise
systems
of
resource
allocation
and
limited
government
intervention
2. Emerging/Developing
Economies
-
India,
China,
Brazil
and
transition
economies
(formerly
Communist)
in
Eastern
Europe.
These
are
in
the
process
of
raising
rates
of
eco
growth/development
but
have
lower
per
capita
incomes
and
living
standards
than
advanced
economies.
The
advanced
economies
dominate
world
GDP
and
trade
52%
of
world
GDP
and
64%
of
world
exports
in
2010
BUT
only
represent
15%
of
total
world
population!
Currently,
the
major
emerging
economies
of
Brazil,
Russia,
India
and
China
have
sustained
rates
of
high
eco
growth
and
account
for
25%
of
world
GDP
The
developing
countries
are
located
in
Asia,
Middle
East
and
North
Africa
members
of
the
Organisation
of
Petroleum
Exporting
Countries
(OPEC)
with
significant
oil
exports
to
the
world.
in
2010,
accounted
for
48%
of
world
GDP,
36%
of
world
trade
and
85%
of
world
population
World
GDP
at
purchasing
power
parities
(PPP)
is
the
total
market
value
of
G/S
produced
in
the
world
over
time
adjusted
for
inflation
+
exchange
rates
World
output
was
US
$74,275b
in
2010
Advanced
economies
(34)
accounted
for
52%
of
world
GDP
whilst
emerging
economies
(150)
accounted
for
48%
of
world
GDP
in
2010
small
number
of
adv
economies
dominate
the
global
production
of
G/S
compared
to
the
150
other
eco's.
Globalisation
and
Economic
Integration
Globalisation
has
generally
led
to
higher
growth
in
world
output
and
higher
growth
in
world
trade
this
trend
was
halted
by
GFC
in
2009
due
to
increased
risk
of
lenders,
higher
cost
of
credit
and
increased
volatility
in
asset
prices
+
exchange
rates
- Global
output
contacted
by
-0.5%
- Exports
overall
contracted
by
-20%
During
downswings
such
as
GFC,
global
trade
has
contracted
faster
than
world
economic
output
(GDP)
highlighting
the
greater
volatility
of
trade
compared
with
GDP.
Developments
in
foreign
exchange
markets
have
mirrored
the
rapid
growth
in
the
turnover
of
financial
markets,
with
the
holdings
of
financial
assets
growing
faster
than
economies
in
general
$A
was
5th
most
traded
currency
in
2010
Globalisation
Total
FDI
in
2008
is
6
times
its
level
since
1995
and
Foreign
The
general
growth
in
Foreign
investment
has
been
due
to
the
easing
Investment
TNC's
and
Foreign
Investment
Global
Production
Webs
Average
world
growth
in
output
was
3.9%
between
1997
-
2008
(prior
GFC)
Average
world
growth
during
global
resources
boom
2004-08
was
5%
- Larger
economies
(China,
Russia,
India,
Brazil)
grew
around
7.5%
during
that
time
GFC
led
to
a
fall
in
output
contraction
in
world
GDP
of
-0.5%
Since
national
economies
are
increasingly
linked
through
the
process
of
globalisation,
changes
in
the
international
business
cycle
will
impact
directly
on
domestic
business
cycles
- Changes
in
US
business
cycle
usually
affect
the
rest
of
the
world
NOTE:
- Peak
=
supply
or
capacity
constraints
where
inflation
begins
to
rise
and
growth
in
output
is
no
longer
available
2006-07
global
growth
peaked
at
5.2%
- Recession
=
minimum
level
of
global
output
GFC
-0.5%
contraction
in
growth
Impact
on
Economies
External
Shocks
on
Economies
In
this
period,
growth
of
5%
was
above
the
trend
of
3.7%
between
1972-2004
- Rapid
expansion
was
based
across
China,
Europe
+
Japan
The
effects
of
growth
led
to;
1. Stronger
demand
for
resources
2. Higher
rates
of
capacity
utilisation
led
to
increased
investment
in
new
plants
+
equipment
3. Rates
of
unemployment
fell
Australia
-
as
a
commodity
exporter
benefited
greatly
X
grew
by
2.6%
46.5%
of
all
X
were
commodity.
GFC 2007-09
International
financial
markets
experienced
volatility
due
to
the
collapse
in
the
sub-
prime
mortgage
market
in
US
in
07
- Led
to
bankruptcies
reflecting
a
decline
in
credit
worthiness
of
borrowers
and
lending
standards
Transmitted
to
international
financial
markets
asset
prices
for
shares,
bonds
and
other
securities
fell
+
increase
in
IR
to
reflect
the
cost
of
borrowing
Sentiment
in
global
financial
markets
deteriorated
in
08,
as
banks
tightened
funding
to
leveraged
investors
triggering
the
sale
of
assets
- Worsened
with
the
collapse
of
Lehman
Brothers
merchant
bank
GDP
grew
by
just
1.1%
in
08
The
increasing
extent
of
financial
and
trade
integration
between
adv
and
emerging
eco's
facilitated
the
spread
of
the
GFC
Since
GFC
the
responses
of
govt
include;
1. Governments
extended
guarantees
for
bank
deposits
2. Central
banks
cut
official
interest
rates
3. Fiscal
stimulus
packages
to
boost
growth
and
support
employment
As
global
integration
proceeds,
developing
eco's
are
more
likely
to
expand
their
share
of
the
global
economy
China,
India,
Brazil,
Russia
Major
trends
to
emerge
in
world
trade
+
finance
throughout
1990s-2000s
include;
1. Globalisation
of
world
trade
led
to
a
global
market
place
dominance
of
TNCS
2. Growth
of
intra-regional
trade
(EU,
NAFTA,APEC
etc)
saw
FDI
3. Growth
of
Asia-Pacific
region
and
China
4. Growth
of
trade
in
elaborately
transformed
manufactures
(ETMs)
Main
reasons
for
increasing
world
economic
and
trade
integration
include;
1. Financial
deregulation
and
floating
exchange
rates
increased
the
mobility
of
capital
2. Reduction
in
trade
barriers
has
increased
trade
flows
3. Increased
specialisation
in
ETMs
and
services
4. Collapse
of
communism
in
former
Soviet
Union
and
eastern
European
countries
increased
the
demand
for
capital
5. Rise
of
regional
economic
integration
through
trade
agreements
increased
intra-regional
trade
flows
Purchasing
Power
Parity
(PPP)
-
theory
that
states
that
exchange
rates
should
adjust
to
equalise
the
price
of
identical
G/S
in
different
economies
throughout
the
world
Economic
Growth
-
refers
to
the
increases
in
real
GDP
over
time
(quantitative)
rising
national
output,
incomes,
employment
and
living
standards
comes
from;
1. Increased
use
of
resources
land,
labour,
capital
and
enterprise
2. Increased
productivity
of
existing
resource
use
rising
labour
and
capital
productivity
Capital
Widening
-
occurs
when
capital
keeps
pace
with
growth
in
labour
force
Capital
Deepening
-
occurs
when
capital
grows
faster
than
labour
force
Despite
the
economic
benefits
of
globalisation,
the
rewards
are
not
shared
equally
between
advanced,
emerging
and
developing
countries
Despite
poverty
levels
falling
(US$1.25/day)
(from
1.9b
1981
-
1.4b
2005)
there
are
still
regional
differences
- Greatest
reduction
in
poverty
occurred
in
East
Asia
where
it
declined
from
78%
1981
to
17%
in
2005
fell
by
more
than
750m
(mostly
in
China)
- World
Bank
estimated
that
90m
more
in
poverty
due
to
GFC
in
developing
countries
Distribution
of
world
income
is
measured
by
Gross
National
Income
(GNI)
per
capita
i.e.
income
per
head
of
population
World
Bank
classifies
countries
into;
1. Low
income
countries
(>$)
-
Africa
(mainly)
Niger
2. Lower
middle
income
countries
($996
-
$3945)
Eastern
Europe
Ukraine
+
Middle
East
(Iraq)
3. Upper
middle
income
countries
($3946-$12,195)
South
America
(Mexico/Brazil)
4. High
income
(<$12916)
US,
AUS,
NZ
The
global
distribution
of
wealth
refers
to
a
comparison
of
the
ownership
of
net
assets
between
countries
and
regions
of
the
world
- Measures
net
assets
rather
than
average
national
income
A
major
change
in
the
global
economy
has
been
the
importance
of
developing
and
emerging
economies
(150
in
total)
in
their
contribution
to
world
output/trade
Major
emerging
eco's
of
Brazil,
Russia,
India
and
China
(BRICs)have
been
dominant
in
sustaining
higher
rates
of
growth
than
the
adv
eco's
1. Developing
Economies
-
Congo/Niger
economic
integration
has
not
really
occurred
in
many
developing
countries
lack
of
resources/governance
and
higher
trade
barriers
2. Emerging
Economies
-
BRICS
increased
their
contribution
to
world
output/trade
and
are
undergoing
rapid
economic
development
3. Advanced
Economies
-
US,
Aus,
Canada
account
for
52.3%
of
world
GDP
-
34
advanced
eco's
exist
today.
Reasons
for
Differences
in
Economic
Development
between
Nations
Globalisation
(economic
integration)
has
resulted
from
reduced
trade
barriers
and
greater
financial
market
liberalisation
led
to
growth
in
world
GDP,
trade
and
financial
flows
and
FDI
Globalising
economies
(BRICS)
grew
on
average
5%
in
1990s
compared
to
the
non-
globalising
countries
growing
at
1.4%
- Led
to
a
large
reduction
in
world
poverty
and
an
improvement
in
HDI
closing
the
income
gap
Other
effects
of
globalisation
include;
1. International
convergence
-
of
economic
systems
as
more
countries
adopt
market
capitalism
and
democracy
2. Risk
of
financial
contagion
-
as
financial
crises
can
be
transmitted
quickly
GFC
Despite
the
positive
impacts
of
globalisation
on
some
countries,
it
has
tended
overall
to
reinforce
the
existing
income
disparities
between
advanced,
emerging
and
developing
countries
- Since
1990,
20
countries
has
suffered
a
reversal
in
their
HDI
according
to
the
World
Bank
Environmental Sustainability