THE GLOBAL

ECONOMY
Prepared by:
Leevan D. Caceres
In today’s world, no nation exists in
economic isolation. All aspects of a
nation’s economy—its industries,
service sectors, levels of income and
employment, and living standard—are
linked to the economies of its trading
partners. This linkage takes the form of
international movements of goods and
services, labor, business enterprise,
investment funds, and technology.
Indeed, national economic policies
cannot be formulated without
evaluating their probable impacts on
the economies of other countries.
The high degree of economic interdependence among today’s
economies reflects the historical evolution of the world’s economic
and political order. At the end of World War II, the United States was
economically and politically the most powerful nation in the world, a
situation expressed in the saying,
‘‘When the United States sneezes, the
economies of other nations catch a cold.’’
But with the passage of time, the U.S. economy has become
increasingly integrated into the economic activities of foreign
countries. The formation in the 1950s of the European Community
(now known as the European Union), the rising importance of multi-
national corporations in the 1960s, the 1970s market power in world
oil markets enjoyed by the Organization of Petroleum Exporting
Countries (OPEC), and the creation of the euro at the turn of the
twenty-first century all resulted in the evolution of the world
community into a complicated system based on a growing
interdependence among nations.
ECONOMIC •Economic globalization refers to the increasing
interdependence of world economies as a result of the growing
GLOBALIZATI scale of cross-border trade of commodities and services, flow of
international capital and wide and rapid spread of technologies
ON
ECONOMIC • the process of making the world economy an organic system
by extending transnational economic processes and economic
GLOBALIZATI relations to more and more countries and by deepening the
ON economic interdependencies among them
ECONOMIC • the process of making the world economy an organic system
by extending transnational economic processes and
GLOBALIZATI economic relations to more and more countries and by
ON deepening the economic interdependencies among them
ECONOMIC • the process of making the world economy an organic system
by extending transnational economic processes and economic
GLOBALIZATI relations to more and more countries and by deepening the
ON economic interdependencies among them
POST-WORLD WAR II
ECONOMIC SYSTEM
THE BRETTON WOODS CONFERENCE
The Bretton Woods Conference
The Bretton Woods Conference
◦ agreed on the creation of two international economic organizations:
The Bretton Woods Conference
◦ agreed on the creation of two international economic organizations:
1. International Monetary Fund (IMF); and
The Bretton Woods Conference
◦ agreed on the creation of two international economic organizations:
1. International Monetary Fund (IMF); and
2. World Bank (WB).
The Bretton Woods Conference
◦ agreed on the creation of two international economic organizations:
1. International Monetary Fund (IMF); and
2. World Bank (WB).
◦ also includes the creation of a third entity, the General Agreement on
Tariffs and Trade (GATT)
INTERNATIONAL
MONETARY FUND

WORLD BANK
THE WORLD
BANK
The World Bank is an International Financial
Institution that provides financial and technical
assistance to developing countries for development
programs.
 WORLD BANK
MISSION

 Reduce poverty in the globe

 Improve the living standard

 OBJECTIVES AND FUNCTIONS
Provide assistance to developing countries.

Promote the economic development of the world’s poorest

countries.

Finances the poorest developing countries whose per capita

GNP is less than $865 a year special financial assistance
through the International Development Association (IDA).
Two types of loans that
the WB can offer:

Investment Loans

Development Policy Loans

 The World Bank’s two closely
affiliated entities:

The International Bank of

Reconstruction and Development
(IBRD)

The International Development

Association (IDA)
 In addition to the IBRD and the IDA, three other
institutions are closely associated with the World Bank:

The Internal Finance Corporation (IDFC)

The Multilateral Investment Guarantee Agency (MIGA)

The International Centre for Settlement of Investment

Disputes (ICSID)
 5 Largest
Shareholders
of World bank:
France- 4.30%
Germany- 4.49%
Japan- 7.87%
United Kingdom- 4.30%

United States- 16.39%

 IMF is the intergovernmental organization that oversees the global financial
system by following the macroeconomic policies of its member countries, in
particular those with an impact on exchange rate and the balanc of payments.

It is an organization formed with a stated objective of stabilizing international

exchange rates and facilitating development thro ugh the enforcement of
liberalizing economic-policies on other countries as a condition for-loans,
restructuring or aid.

IMF is a forum of national economic policies, international mo netary and

financial systems, which involves active dialogue wi th each member country.
 The IMF’s current total resources of about SDR 977 billion translate into a
capacity for lending of about SDR 713 billion (around US$1 trillion).

Five largest shareholders—United States, Japan, Germany, France, United

Kingdom

The IMF was created to support-orderly international currency e xchanges and to

help nations having balance of payment problems through short term loans of
cash.
 MEMBERSHIP
There are two types of members:

ORIGINAL MEMBERS: All those

countries whose representativ es
took part in BRETTONWOODS
CONFERENCE and who agreed to
be the members of the fund prior
to 31st December, 1945

ORDINARY MEMBERS: All those-

whebecame its members sub
sequently.
 PURPOSE
To promote international monetary cooperation

expansion and balanced growth of international

trade

Promote exchange rate stability

The elimination of restrictions on the international flow

of capital
 PURPOSE
Help establish multilateral system of payments and
eliminate foreign exchange restrictions.

Make resources of the Fund available to members

Shorten the duration and lessen the degree=of

disequilibrium in international balances-of payments

Promote international monetary cooperation,

exchange stability, and orderly exchange arrangements,
 FUNCTION

Ensure the stability of the

international monetary
system.
 FACTS ABOUT IMF

 IMF is still one of the world’s largest official holders of gold.

 The IMF holds about 90.5 million ounces, or 2,814.1 metric tons, of gold at
designated depositories. The IMF's total gold holdings are valued on its balance
sheet at about $4.9 billion (SDR 3.2 billion) on the basis of historical cost. The
IMF's holdings amount to about $160 billion (as determined by end-February
2012 market prices).
 The largest borrowers: Argentina, Ukraine, Greece, Egypt
 The largest precautionary loans: Mexico, Colombia, Morocco
 BUBBLE THOUGHT:
1. Why does the Philippines import rice from other countries even though rice
can be produced in our country?
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2. Do you believe in “buying Filipino” even if you have to pay a higher price?
Why? What is the best way to attract Filipinos who prefer Western products
and services to buying Filipino?
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