Presentation on theme: "The Global Economic Environment"— Presentation transcript:
1 The Global Economic Environment The Coming Boom1974-19931994-2003Wealthy Industrial CountriesDeveloping CountriesEast AsiaSouth AsiaLatin AmericaEastern Europe*Sub-Saharan AfricaMiddle East & North Africa*Includes former Soviet UnionReal GDP growth, annual average %Source: World Bank, The Economist
2 Economic Systems Capitalist Market allocation of resources Socialist Command allocation of resourcesMixedReality-a variation in between.
3 Economic Freedom An index with consideration of: trade policy taxation policygovernment consumption of economic outputmonetary policycapital flows and foreign investmentbanking policywage and price controlsproperty rightsregulationsthe black market.
4 Country Income Segmentation High Income (Advanced Countries)- Triad- OthersUpper Middle Income (NIC's)Lower Middle Income (DC's)Low Income (LDC's)+ $9,385+ $3,036+ $765< $765
5 National Production Gross National Product (GNP) Gross Domestic Product (GDP)
6 Drawbacks of GNP and GDP UncountedTransactionsQuestionof GrowthProblemof AveragesPitfallsof Comparison
7 Purchasing Power Parity Estimate of GNP Per Capita at PPP (Selected Countries)PPP Estimate ofGNP Per Capita(U.S. = 100)SelectedCountryGNPPer CapitaUnited StatesSwitzerlandJapanCanadaRussiaMexicoNigeriaIndia26,98040,63039,64019,3802,2403,32026034026,98025,86022,11021,1304,4806,4001,2201,400
8 The Expanding Triad 1997 figures N. American Free Trade Area GNP(billion)Population(million)GNPPer CapitaN. American Free Trade Area$ 8,354393$ 21,248U.S., Canada, Mexico% of World:30%7%Japan and the Tigers$ 5,638284$ 19,831Hong Kong, Japan, Malaysia, Singapore, South Korea, Taiwan, Thailand% of World:21%5%European Economic Area$ 8,293374$ 22,134EU: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, U.K.EFTA: Iceland, Switzerland% of World:30%7%
9 Big Emerging Markets: 1997 Market % of World Population % of World GNP PPPMarketGNP(billion)GNPPer CapitaBEM (Total) $4,248 $1,CEA (Total) 1,318 1,ChinaTaiwan , <1Hong Kong ,225 1 <1 <1Brazil 590 3,Korea, Rep ,IndiaMexico 318 3,Russian Federation 301 2,Argentina 297 8,Turkey 184 2,South Africa 134 3,IndonesiaPoland 108 2,770 <1 1 1
10 Big Emerging Markets: 2010 Market % of World Population % of World GNP PPPMarketGNP(billion)GNPPer CapitaBEM (Total) $7,673 $2,CEA (Total) 2,724 1,China 1,952 1,Taiwan , <1Hong Kong ,837 1 <1 <1Korea ,Brazil 877 4,IndiaMexico 545 4,Argentina ,Russian Federation 466 2,Turkey 330 4,IndonesiaSouth Africa 208 3,Poland 201 4,
11 BOP (Balance of Payments) 1. DefinitionFinancial transaction statements between its residents and those of the rest of the world.2. Double entry system+ (inflow)(outflow)Qs: What are the sources of inflow and outflow of income?
12 BOP (cont’) 3. Current Account vs. Capital Account all international export and imports of goods and services, private gifts and public aid transactions between countriesA record of all long-term and short-term capital flows4. Trade BalanceThe balance on current account
13 Ex: U.S. BOP, 1994-1997 (US$B) 1994 1995 1996 1997 A. Current Account Trade Deficit1994199519961997A. Current Account1. Goods: Export FOB504.45577.69613.89681.272. Goods: Imports FOB3. Balance on Goods4. Services: Credit199.25217.80236.71256.065. Services: Debit6. Balance on Goods andServices-97.34-96.06B. Capital Account-.18.104.22.168Total A + BReserve