Dreaming with BRICs Flashcards
"a compare the economic potential of emerging markets such as Brazil, Russia, India, and China (BRICs) to that of developed markets, in terms of economic size and growth, demographics and per capita income, growth in global spending, and trends in real exchange rates; b explain why certain developing economies may have high returns on capital, rising productivity, and appreciating currencies; c explain the importance of technological progress, employment growth, and growth in capital stock in
LOS a
Economic Size: All together larger than G6 in dollar terms. Only Japan and US to be among top countries
Economic Growth: India - fastest growth.
Income and Demographics: People are going to be poorer than avg people in G6 countries except russia. Working age population to decline steeper in Russia and China than in India and Brazil
Global Demand Patterns: Twice of the G6 countries.
Currency Movements: Rising currency contribute to the GDP
LOS B
- Lesser capital than developed economies. Returns on capital are higher and given investment results in higher growth rate in capital stock.
- Use of technology available in more developed countries to “catch up”
- Currencies rise as higher productivity leads economies to converge on PPP exchange rates.
LOS C
Growth accounting breaks the GDP into three components
- Growth in employment
- Growth in capital stock
- technological progress
LOS D
Intial Income per capita drives the productivity catch up
investment drives capital accumulation
level of education can be thought of as helping to determine the speed of convergence
CONDITIONS:
- Sound Macroeconomic policies and a stable macroeconomic background
- Strong and stable political institutions
- Openness
- High levels of education
LOS E
- higher growth in these economies could offset the impact of greying population and slower growth in advanced economies
- Higher growth - higher returns - increased demand for capital - currency realignment
- Demand and pricing pattern will change in these economies
- Strategic choice of being involved in emerging markets by many firms
- Change in the composition of top economies of the world
