Welcome to Scribd. Sign in or start your free trial to enjoy unlimited e-books, audiobooks & documents.Find out more
Download
Standard view
Full view
of .
Look up keyword
Like this
164Activity
0 of .
Results for:
No results containing your search query
P. 1
MB0037

MB0037

Ratings: (0)|Views: 1,949|Likes:
Published by shamitds06

More info:

Published by: shamitds06 on Jun 08, 2010
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as DOC, PDF, TXT or read online from Scribd
See more
See less

11/09/2012

pdf

text

original

 
INTERNATIONAL BUSINESS MANAGEMENT
MB0037ASSIGNMENT-1
Q1.Are crises, as the recent recession of 2008 shows, the essential feature of globalization?Ans.After four years of average annual global real GDP growth of better than 4½percent, recent data indicate that the pace of advance is slowing in the major industrial countries, with the US economy on the verge of, and perhaps alreadyin, outright recession. So far, the evidence points to less of a slowdown in other industrial countries, while most emerging-market economies appear likely tomaintain quite strong, albeit somewhat slower, growth.Meanwhile, world consumer price inflation (on a 12-month basis) is up frombarely 2 percent seven years ago to nearly 5 percent as of February 2008.Among both industrial (except for Japan) and major emerging-market countries,inflation is now running at, or in most cases somewhat above, rates consistentwith policy objectives. Driven by persistently rising global demand, commodityprices continue to surge upward across the board, especially measured in USdollars but also in terms of the rapidly appreciating euro.In this situation, the world economy really needs what is now forecast fo2008/2009: a significant slowing of economic growth, down to 3.8 percent (year over year) in 2008 from 4.7 percent in 2007. This slowdown will be led by adecline of demand growth in the US economy, which is both pronounced andextends over a considerable period. Indeed, in view of the exceptionallyaggressive easing of macroeconomic policies already in place in the UnitedStates and the likelihood of monetary policy remaining highly accommodative solong as US financial markets remain under stress, it is now desirable that real
 
 
GDP growth for 2008 fall to a forecasted rate of barely more than 1 percent (year over year)—an outcome consistent with a very mild and brief recession.Reflecting some risk of a somewhat deeper and more prolonged recession in theUnited States, the growth forecast for 2009 (year over year) is set at 2 percent.For the rest of the world, a mild US recession in 2008 will have a modestnegative effect on real GDP growth, with more significant impacts in Mexico andCanada. In countries where the slowdown threatens to become excessive andinflation is under control, some easing of monetary and perhaps fiscal policy isboth likely and appropriate. More generally, however, it is too soon to call for ageneral and significant easing of macroeconomic policies. A general slowdown inglobal economic growth is needed to cool the clearly apparent upsurge inworldwide inflation.Some countries, including Australia, China, and Sweden, have recently tightenedmonetary policies in efforts to forestall inflation. Other countries, includingCanada and the United Kingdom, have eased monetary policies modestly inresponse to weakening economic growth. Quite appropriately, however, nocountry has so far followed the lead of the Federal Reserve in aggressivemonetary easing.As the custodian of the world's second most important currency, the policy of theEuropean Central Bank (ECB) is particularly noteworthy. Inflation in the euroarea is running more than a percentage point above the ECB's announcedobjective. The euro area economy has recently been growing significantly morerapidly than its potential rate of about 1½ percent. The unemployment rate hasfallen half a percentage point below the minimum reached in the last expansion.Key monetary aggregates are surging at rates well above their desired targetranges. In this situation, one would normally have expected the ECB to haveraised its key policy interest rate a further 100 basis points since last summer.Instead, with financial turbulence spreading to some extent from the UnitedStates to euro area financial markets and institutions, with evidence that euro
2
 
 
area economies are beginning to slow, and with a sharp appreciation of the euroagainst the dollar, which is likely to slow growth and impede inflation, the ECBhas wisely held back from further interest rate increases. With the euro areaeconomy now expected to expand by about 1½ percent this year (in line withpotential), the timing and direction of future adjustments in ECB interest ratesremain—appropriately—dependent upon the evolving balance of risks foinflation and economic growth.For Japan, the strengthening of the yen against the dollar in recent months andweakening of exports to the United States, together with likely weakness indomestic demand growth, suggest a further write-down in the forecast for realGDP growth for 2008 to 1.2 percent (from 1¾ percent forecast last October). Thisreflects the assumption that the surprising upsurge of GDP growth in the finalquarter of 2007 will be partly offset in the first half of this year.For the industrial countries as a group, real GDP growth this year is now forecastto be 1.5 percent, and growth for 2009 is projected to be moderately stronger atabout 1.9 percent.In emerging-market economies, circumstances vary and so do appropriatepolicies, but the general prospect is for continued quite strong economic growth,despite the slowdown in the industrial countries.Is this "decoupling?" Not really. Mexico, Caribbean and Central Americancountries, and Asian economies that are particularly dependent on exports to theUnited States are already feeling and will continue to feel the effects of the USeconomic slowdown. More broadly, however, strong growth of domestic demandin many emerging-market economies will sustain reasonably strong GDP growth,and rising demand for raw materials by key emerging-market economies, mostimportantly China, will help keep commodity prices strong and aid growth in other emerging-market economies.
3

Activity (164)

You've already reviewed this. Edit your review.
1 hundred reads
1 thousand reads
Poornima Hirimat liked this
Ranjit Reddy liked this
danbouy liked this
osamah liked this
SATIANI liked this
guptarohitkumar liked this
guptarohitkumar liked this
guptarohitkumar liked this

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->