International Economic Integration Flashcards
What is the global economy?
the integration (liberalisation of trade) between the economies of the world
What is Gross World Product?
Refers to the total value of all goods and services produced that are produced worldwide over a period of time
GWP is used to measure overall trends in the global economy
What is the most accurate measure of GWP?
GDP at purchasing power parity is the total value of GWP adjusted for variations in price and different exchange rates
Purchasing power parity is where currencies are converted to be in equilibrium, so GDP levels across different economies can be compared accurately
According to the IMF 2019 Global Economic Outlook, advanced economies represent 40% of the world’s GDP at PPP but only contain 14% of global population
What are four forces driving globalisation?
New Markets; growth of global markets in services, such as finance and international transportation, motivates deregulation of financial markets
New Actors; the growth of transnational corporations (TNC’s) has led to supplies being sourced internationally, increasing global integration
New Rules; with the increased focus on developing countries, governments of the world have sought greater global communication and integration
New Communication; the internet, and the increase in use of electronic communication has facilitated an increase in the efficiency of global communication
What have been recent global trends in trade of goods and services?
Trade in goods & services has increased from 38% of global output in 1990 to 50% of global output in 2018
This trend has been most influenced by the increase in trade agreements between countries and decreased domestic production
For example, Australia reduced tariffs to a record low 2.03% in 2020 and has promoted free trade through agreements such as AUSFTA
What have been recent trends in financial flows?
Finance is the most globalised feature of the world economy
The main drivers of global financial flows include financial deregulation (which has occurred since the 1980s) and speculators who buy and sell financial assets with the aim of making profits on short term price movements
They operate on the foreign exchange market, but can serve to increase volatility - forex daily turnover increased from $4 trillion in 2010 to $6.6 trillion in 2020, causing a 40% increase in trading volume over the past decade
What has been the impact of the growth of FDI & TNCs?
Foreign direct investment is the purchase of a controlling interest in a foreign subsidiary (over 10%)
Easing capital controls and financial deregulations have caused FDI’s to increase by over 6 times their level a decade ago
The global expansion of TNC’s has been prevalent in manufacturing, where companies can take advantage of cheap resources and low labour costs in other countries to maximise the efficiency of their supply chains
What has been the impact of technology on global GDP?
The introduction of faster mobile networks increases GDP as it facilitates faster mobile connectivity, driving gains in productivity and efficiency - in 2016, mobile technologies generated 4.4% of global GDP, increasing to 4.9% in 2020
How does migration increase the technological gap?
This increases the technological gap between developed and developing countries as skilled labour is attracted to greater opportunity in advanced economies
What is the International Business Cycle?
The International Business Cycle refers to changes in world output and economic activity across time - it’s level of impact on domestic business cycles will depend on the level of economic integration
Research by the RBA shows 63% of changes in Australian output have been due to changes in interest rates and inflation from G7 nations
