Globalization

(Page: 1-17 of text book 2)

Channels

 Trade
 FDI
 Non—FDI financial flows (Banks, Portfolio investment)
 Labor movement

Long term increasing trend in each indicator— numbers given in the book.

Factors behind increased pace(Read by yourself)

 Market—related—pressure of competition
 Componentization of production
 Fall in transport cost
 ICT—facilitates coordination
 Policies at national and international level regarding trade, FDI, financial
flows—World bank, IMF, WTO

Positive impact

 Trade: specialization according to comparative advantage—better allocation

of resources—reduces the need for excessive inventories — trade
liberalization attracts FDI—No constraint imposed by domestic demand —
access to improved technology and knowledge thereof—competition and
cost reduction—Relieves input bottlenecks and keep inflation in check —
improved income distribution.
 FDI and non—FDI financial flows: Bridge dual gaps— the former as an
agent of production, management and marketing technology transfer.
 Remittances: reverse migration—Skill and technology transfer

Attendant risks
  Trade: Wiping out of potentially viable domestic industries (infant industry
argument)
 Vulnerability arises from sudden drop in demand for exports, a change in
marketing strategy of TNCs, trade restrictions and exchange rate policy
changes by trading partners
 Non—FDI financial flows: Currency and maturity mismatch—self
fulfilling expectation regarding the exchange rate—Pro-cyclical herd
behavior
 FDI—infant industry argument—resource outflow—undue incentives
 Remittances: Brain drain

Policy changes and Impact

Pages 12—14 of the book

Concluding observations

Scan copies are provided in TSR (page:17)