Global Economy Global economy is also referred to as world economy. This term refers to the international exchange of goods and services that is expressed in monetary units of money. It may also mean as the free movement of goods, capital, services, technology, and information. In some contexts, “global” or “International” economy is distinguished and measured separately from national economies while the “world economy” is simply an aggregate of the separate country’s measurements. World economy is exclusively limited to human economic activity and is typically judged in monetary terms. Typical examples are illegal drugs and other black market goods which by any standard are a part of the world economy, but for which these is by definition no legal market of any kind. Global economy or economic globalization is concerned on the globalization of production, finance, markets, technology, organizational regimes, institutions, corporations, and labor. While economic globalization has been expanding since the emergence of trans-national trade, ithas grown at an increased rate due to an increase in communication and technological advances under the framework of General Agreement on Tariffs and Trade and World Trade Organization, which made countries gradually cut down trade barriers and open up their current accounts and capital accounts.oped economies estment and sand in This recent boom has been largely supported by de’ integrating with majority world through foreign direet inv lowering costs of doing business, the reduction of trade bart many cases cross border migration, Market Integration When prices among different location or related goods follow the same patterns over a long period of time, market integration exist, Similarly, when groups of prices often move proportionally to each other and when this relation is very clear among different markets it is said that the markets are integrated. Hence, it could be concluded that market integration is an indicator that explains how much different markets are related to each other. Role of International Financial Institutions in the Creation of Global Economy Let us first define International Financial Institution (IF IS). An international financial institution is chartered by more than one country and therefore are subjects to international law. Its owners or shareholders are generally national governments, although other international institutions and other organizations occasionally figure as shareholders, The most prominent IFls are creations of multiplé nations, although some bilateral financial institutions (created by two countries) exist and are technically IFIs, The best known IFls were established after World War II to assist in the reconstruction of Europe and provide mechanisms for international cooperation in managing, the global financial system. Today, the world’s largest IF] is the European Investment Bank, [1] with a balance sheet size of €573 billion in 2016. [2] This compares to the two components of the World Bank, the IBRD (assets of $358 billion in 2014) [3] and the IDA (assets of $183 billion in 2014). [3] For comparison, the largest commercial banks each have assets of ¢.$2,000-3,000 billion. (Source: Website) The International Financial Institutions (IFIs) are: International Monetary Fund (IMF) - Multilateral Development Banks (MDBs) which which include a. World Bank Group b. African Development Bank c. Asian Development Bank‘The last four (4) of these each focus on a single world region and thus are often called Regional Development Banks (RDB). Global in scope are International Monetary Fund and the World Bank. They are also specialized agencies in the United Nation system but are governed independently of it. Membership Composition of IFIs 1. only sovereign countries are admitted as member-owner 2. broad country membership to include borrowing developing countries and developed donor countries membership in regional development banks include countries around the world as members (not limited to countries from the region) 4. has its own independent legal and operational states Main Objectives: * IME provides temporary financial assistance to member countries to help ease balance of payments adjustments. * MDBs provide financing for development to developing countries through - long term loans (with maturities of up to 20 years) at interest rates way below market rates. Funding comes from international capital markets and relend to borrowing government in developing countries. - very long-term loans (sometimes called credits with maturities of 30- 40 years) at interest rates below market rates. Funding for loans come from direct contributions by government in the donor countries. - Grant financing by some MDBs for technical assistance advisory service or project preparation. All IFIs are active in supporting programs that are for the global economy ~ in addition to their primary role of financing and providing technical assistance to programs at the country level.