module 3

• Market Integration


  A process of economic transformation within a region, bloc, or group of countries, aimed at pegging one price for the same product; merging markets or economic communities into one single market
• Global corporation


  A company that operates in a number of countries, in contrast with companies that operate only in one or few countries
• Lender of last resort


  A financial institution that offers loans to countries, banks, or other financial institutions in times of crisis or that are in some sort of financial difficulty and hence, considered highly risky to be served by typical lenders
• Actors that facilitate economic globalization

  • Governments
  • Global or multinational corporations (MNCs)
  • Global institutions
• Global economy


  The world economy or the economy of the humans of the world, considered as the international exchange of goods and services that is expressed in monetary units of account
• Examples of economic globalization

  • Global supply chains for the manufacture of many devices, ranging from cars to smart phones; the processes surrounding raw materials, components, and assembly may take place across multiple countries
• Because of its size and interconnectedness, developments in the US economy are bound to have important effects around the world
• The US has the world's single largest economy, accounting for almost a quarter of global GDP (at market exchange rates), one-fifth of global FDI, and more than a third of stock market capitalization
• The US is the most important export destination for one-fifth of countries around the world
• Colonialism, with its inherent constraints on economic development and its built-in asymmetries, collapsed
• Factors that contributed to the changing structure of the global economy

  • Advances in transportation and communications technology
  • Management innovation in multinational companies
  • A process of learning about doing business in multiple and diverse environments
  • The integration of multinational supply chains
• The early high-growth economies— Japan, South Korea, and Taiwan— initially exported labor-intensive products, then graduated to more capital-intensive products such as automobiles and motorcycles, and then to human capital intensive activities such as design and technology development
• Mixed economic system


  An economic system which includes a variety of private freedom, combined with centralized economic planning and government regulation
• Types of economic systems

  • Traditional economy
  • Command economy
  • Market economy
  • Mixed economy
• The Philippines has a mixed economic system
• The Philippines is one of the emerging markets and is the sixth richest in Southeast Asia by GDP per capita values, after the regional countries of Singapore, Brunei, Malaysia, Thailand and Indonesia
• Primary exports of the Philippines

  • Semiconductors and electronic products
  • Transport equipment
  • Garments
  • Copper products
  • Petroleum products
  • Coconut oil
  • Fruits
• Major trading partners of the Philippines

  • Japan
  • China
  • United States
  • Singapore
  • South Korea
  • Netherlands
  • Hong Kong
  • Germany
  • Taiwan
  • Thailand
• Global market integration


  Price differences between countries are eliminated as all markets become one
• Law of One Price


  The prices of identical security, commodities or asset traded anywhere that are exchanged in two or more markets must be the same regardless of location and currency
• In an efficient market, there must be only one price for commodities regardless of where they are traded. Identical goods must have identical prices
• The difference in prices for identical commodities in two countries is due to the foreign exchange (FX) rate between the two countries
• Globalization


  Trade integration
• Microeconomics of globalization


  The myriad ways in which economic actors also may become inserted into the global economy indirectly, through their relations with other economic agents within local, regional, and national markets
• Examples of microeconomics

  • Demand
  • Supply
  • Prices
  • Elasticity
  • Opportunity Cost
  • Labor Economics
  • Competition
  • Competitive Advantage
  • Consumer Choice
  • Consumer Confidence
  • Business Confidence
  • Information Economics
  • Welfare Economics
  • Productivity
• Law of demand


  As the price increases, the quantity demanded decreases; and as the price decreases, the quantity demanded increases, ceteris paribus
• Law of supply


  As the price increases, the quantity supplied also increases, and if the price decreases, the quantity supplied also decreases, ceteris paribus
• Some customary prices appear to be sticky in that consumers resist buying above a particular historically established price