International economics migration

The global economy Globalisation refers to the integration between different countries and
economies and the increased impact of international influences on all aspects of
life and economic activity.

Major indicators of integration between economies include:

- International trade in goods and services
- International financial flows
- International investment flows and transnational corporations
- Technology, transport and communication
- The movement of workers between countries

Gross World Product Gross world product is the combined GDP (Gross Domestic product) around the
world over a period of time.

Globalisation Trade in goods and services

● Trade in goods and International trade in goods and services is an important indicator of globalisation
services as it measures how goods and services produced in an economy are consumed in
● Financial flows other economies around the world.
Global trade has grown strongly in recent decades because of new technology in
● Investment and transport and communications, which reduced the cost of moving goods between
transnational economies.
corporations Composition of trade is the mix of goods and services that are traded.
● Technology, transport Direction of trade flows are the countries between which tradeis happening
and communication
● International division of Financial flows
labour, migration International financial flows expanded substantially following the financial
deregulation around the world.
Foreign exchange markets are a network of buyers and sellers exchanging one
currency for another in order to facilitate flows of finance between countries.
Exchange rate is the value of a currency that is expressed in terms of another
currency.
Speculators are investors who buy or sell financial assets with the aim of making
profits from short-term price movements.
The main drivers of global financial flows are speculators who shift billions of
dollars in and out of financial markets worldwide to undertake short-term
investments in financial assets.
Greater global financial flows enable countries to obtain funds that are used to
finance their domestic investment. In this way, global financial flows may enable a
country to achieve higher levels of investment (and therefore, economic growth)
than would otherwise have been possible if finance from overseas were not
available.
Speculative behaviour creates significant volatility in foreign exchange markets
and domestic financial markets and therefore causes large currency falls and
financial currencies.
 Investment and transnational corporations
Foreign direct investment (FDI) refers to the movement of funds between
economies for the purpose of establishing a new company or buying a substantial
proportion of shares in an existing company.
Transnational Corporations (TNC’s) are global companies that dominate global
product and factor markets.
One measure of the globalisation of investment is the expansion of FDI and
accounts for about 20% of total investment. 80% of investment comes from within
national economies.

Technology, transport and communication

Technological developments facilitate the integration of economies.
Technology is also a driver of growth in trade and investment.
Leading business corporations that develop technologies will move directly into
overseas markets to sell their products overseas. These corporations will often
invest in these new countries in order to upgrade the skills of the workforce
increasing foreign investment.
The internet allows greater communication within firms and reduces business
costs enhancing integration between economies.

International division of labour and migration

Rising labour pressures and income inequalities increase the migration levels.
Highly skilled workers are attracted to higher income economies such as Europe
and the United States because of the better job opportunities available in these
countries.
Low skilled labour is also in demand in advanced economies where it may be
difficult to attract sufficient people born locally to do certain types of work.
These trends reflect an international divisional labour where people more to the
jobs where their skills are needed, however there still significant barriers to
working in other countries.

The international and regional Business Cycle refers to fluctuations in the level of economic growth due to either
business cycles domestic or international factors
Gross Domestic product (GDP) is the total market value of all final goods and
services produced in an economy over a period of time.
International business cycle refers to fluctuations in the level of economic activity
in the global economy over time.
The level of economic activity in an individual economy is never constant , there
are ups and downs caused by changes in the level of aggregate supply and demand.

International business cycle

The ebb and flow of world economic growth is known as the international business
cycle.
For most countries, economic growth depends on the rest of the world. When
other countries are experiencing strong growth, the country experiences strong
growth and vice versa.
The transmission of economic conditions is made more immediate by the
increased integration of economies during the globalisation era:
● Trade flows: The level of growth in an economy will have flow on effects on
 the economic activity of its partners
● Investment flows: The economic conditions in a country will determine
whether the businesses from that country will invest overseas. Ie- if an
economy is in a recession, the businesses will not spend outside the
countries and vice versa
● TNC’s: global upturns and downturns are spread through the global
economy.
● Financial flows: countries that are more financially integrated are more
affected by external shocks than other economies.
● Financial market and confidence: Consumer and investor confidence is
strongly influenced by conditions in other economies. Events that threaten
global stability can spark immediate downturns in share values.
● Global interest rate levels: monetary policies in individual economies are
influenced by other economies. Higher interest rates in a major economy
will make borrowing more expensive for emerging and developing
economies.
● Commodity prices: The prices of key commodities (eg: energy, mineral and
agricultural products) are set by global influences. Their prices, in turn
influence the levels of features of the international business cycle (eg:
inflation, investment etc)
● International organisations: international forums such as the G20 or g7
can act as an unofficial forum for coordinating global macroeconomic
policy, especially during periods of economic uncertainty.

Despite the global linkages, many factors that influence the business cycle reflect
distinctive national conditions:
● Interest rates differ between countries and have significant impacts on the
level of economic activity. Higher interest rates, dampen economic activity
while lower interest rates stimulate economic activity.
● A government's economic policy decisions such as fiscal policy has a
significant effect upon the level of economic growth.
● Exchange rates differ between countries and impact the level of
competitiveness and confidence within economies influencing the level of
economic growth.
● Structural factors differ between economies such as the level of resilience
in their financial systems influencing the competitiveness of economies and
their level of growth.
● Regional factors. Ie - how closely are economies integrated with their
neighbours and therefore, are influenced by the economic performance of
their major trading partners.
Regional business cycle
Regional business cycles are the fluctuations in the level of economic activity in a
geographical region of the global economy over time.
- Changes in the US economy will have a more pronounced impact on the
nearby economies of Canada and Mexico.
- Many of the 27 economies of the EU are influenced by activity levels in
Europe's largest economies - Germany and France.
- In the East Asian region, economic conditions are dominated by the
influences of China and Japan.
- Other regions around the world have higher proportion of developing or
low income countries and tend to be less regionally integrated.
- Sub-Saharan Africa is dependent on high income economies for
more than 80% of their exports and therefore, are likely to be
influenced more by international business cycles than regional.
- In South Asia and Latin American regions,regionally dominant
economies such as India and Brazil respectively play a key role.
Regional business cycles tend to be dominated by the largest and more globalised
economies, however smaller economies can affect the performance of regional
economies even if they are not dominated economies or strongly integrated.