2.1

• Structures of Globalization

  • Global Economy
  • Economic Globalization: Interdependence of World Economies
  • Cross Border Trade of Commodities
  • Flow of International Capital
• Enforce

  1. Rapid growth of information

  2. Marketization
• Restructuring Process

  1. Market created firms

  2. Trade of goods and services

  3. Flow of financial capital markets

  4. Flow of technology and communication

  5. Flow of production
• Functional integration between international activities

  Qualitative transformation
• Internationalization is the extension of technological activities between international activities
• Origin: Process creates an organic system of world technology
• International Monetary System

  • Gold Standard
• Gold guarantees non-inflationary inflation: fixed exchange rate
• Gold Standard is a system of backing countries' currency with gold reserves
• Bretton Woods System (1944)
• European Monetary Integration (1960) was a 30-year long process
• European Monetary System (1979) is an arrangement which links currencies to stabilize exchange rates
• European Economic and Monetary Union (EMU) established the common currency "Euro"
• International Trade/Trade Policies

  • Comparative Advantage
  • Specialization
  • European Financial Stability Mechanism (EFSM)
  • European Financial Stability Facility (EFSF)
  • Trade Policies
• International trade involves the exchange of goods, services, and capital across borders
• Comparative Advantage

  • Two countries benefit
• Specialization


  • Maximize welfare; large advantage
• European Financial Stability Mechanism (EFSM) is a permanent fund by the EU to provide emergency assistance to members
• European Financial Stability Facility (EFSF) by the EU provides assistance to members with unstable economies
• Trade policies involve the regulation and agreement of foreign countries
• Trade barriers ensure that imported goods are competitive and of high quality
• Types of Trade Policies

  • National Trade Policies
  • Bilateral Trade Policies
  • International Trade Policies
• Outsourcing involves searching for partnership relations for specific investments
• Essential Features of Outsourcing

  • Firm searches partner with expertise
  • Convince suppliers for customized products
  • Induced relationship-specific investment
• European Monetary Integration began

  1960
• European Monetary Integration was a 30-year long process
• European Monetary Cooperation aimed to reduce the influence of the US dollar on domestic exchange rates
• European Monetary System (1979) objectives

  • Arrange currencies
  • Stabilize exchange rates
• European Monetary System was succeeded by the European Economic and Monetary Union (EMC)
• The European Economic and Monetary Union (EMC) introduced the common currency "Euro"
• European Financial Stability Facility (EFSF) was established by the EU to provide assistance to members with unstable economies
• Special Purpose Vehicle (SPV) by the EU Investment Bank for lending
• International trade is a significant contributor to the Gross Domestic Product (GDP) of countries
• International trade

  • Comparative advantage - both countries benefit
  • Specialization maximizes welfare
• Trade policies involve the regulation and agreements with foreign countries
• Tariffs are taxes for imports
• Imported goods can be more competitive and of higher quality than locally developed ones
• Types of trade policies

  • National trade policies
  • Bilateral trade policies
  • International trade policies defined under organizations like OECD and WTO
• Outsourcing involves searching for partners to invest in specific areas
• Determinants of outsourcing

  • Size of the country
  • Technology for search
  • Specializing components
  • Contracting environments