GLOBALIZATION
- Movement and exchange of economic,
technological, sociocultural, and
political forces.
- The increased interconnectedness and
interdependence of people and country.
CONCEPTS OF GLOBALIZATION
1. ECONOMIC GLOBALIZATION
- The realization of a global
common market, based on the
freedom of goods and capital.
- The development of trade
systems within transnational
actors such as corporations or
NGOs
2. FINANCIAL GLOBALIZATION
- The rise of a global financial
system with international
exchanges and monetary
changes.
- The emergence of under or
unregulated foreign exchange
and speculative markets.
3. POLITICAL GLOBALIZATION
- The creation of a world
government.
- The development and growing
influence of international
organizations such as the UN or
WHO means governmental
action takes place at an
international level.
4. SOCIOCULTURAL
GLOBALIZATION
- nations adopt principles, beliefs,
and customs of other nations.
- Interpenetration of culture
- Two kinds of power:
Soft power- influences other
nations through their culture.
Hard power- influences other
nations through military forces.
5. TECHNOLOGICAL
GLOBALIZATION
- Development of a global
telecommunications
infrastructure and greater data
flow even into the world's most
remote areas.
6. ECOLOGICAL GLOBALIZATION
- Encompasses internationally
coordinated practices and
regulations regarding
environmental protection
- Refers to the global
environmental challenges which
include population growth, food
security,poverty, etc.
IMPACTS OF GLOBALIZATION
1. CULTURAL LOSS
- Since we adapt different
cultures and ideas from other
nations, the original culture of
the country is sometimes
forgotten.
2. ECONOMIC INEQUALITY
- There is modernization and
beautification of the country but
the poor are forgotten
- Rich get richer, poor get poorer
3. POLITICAL CONFLICTS
- Politicians try to protect their
own countries interest thus
sometimes result to political
conflicts.
- Ex. Russia vs Ukraine (NATO
vs USSR)
4. ENVIRONMENTAL CRISIS
- Because of modernization and
globalization our environment is
deteriorating
- Big corporation contribute to
the pollution
ECONOMIC GLOBALIZATION
- is a historical progress
- the result of human innovations and
technological progress.
- It refers to the increasing integration of
economies around the world,
particularly through the movement of
goods, services, and capital across
borders.
Economic Growth- an increase in the size of a
country's economy over a period of time. The
size of an economy is typically measured by the
total production of goods and services in the
economy, which is called gross domestic
product (GDP).
INTERNATIONAL TRADE
- allows countries to expand their markets
and access goods and services that
otherwise may not have been available
domestically - resulting to a competitive
market.
- The world economies have become
more intertwined through globalization
and international trade is a major part of
most economies.
INTERNATIONAL TRADING SYSTEMS:
● GOLD STANDARD
- Emerged in 1867
- UK, US, and other European
nations adopted the gold
standard at an International
Monetary Conference in Paris.
- currency prices and fixed
exchanged rate were all based
on the value of gold
- It is a currency measurement
system that uses gold as a way
to set the value of money. It
ensures that currency under a
gold-standard system can be
exchanged for gold.
➢ “The Great
Depression”
- started in 1929 and
lasted for 10 years
- worst and longest
economic downfall
- caused by the gold
standard because of
limited circulation of
money.
● FIAT CURRENCIES
- Current economic currency
- value is determined by their cost
relative to other currencies.
- This system allows governments
to freely and actively manage
their economies by increasing or
decreasing their money in
circulation as they fit.
● BRETTON WOODS SYSTEM
- earliest system used to control
the value of money between
different countries.
- Under this agreement, countries
- promised that their central
banks would maintain fixed
exchanged rates between their
currencies and the dollar.
- collapsed in the 1970s but
created a lasting influence on
international currency exchange
and trade through its
development of financial
institutions.
➢ International Financial Institutions
1. World Bank
- international financial
institution that provides
loans to developing
countries for capital
programs.
- Responsible for funding
postwar reconstruction
projects and promotes
long-term economic
development.
2. International Monetary Fund
- The global lender of last
resort to prevent
individual countries
from spiraling into
credit crises.
- To ensure the stability
of the international
monetary system - the
system of exchange
rates and international
payments that enables
countries and their
citizens to transact with
each other.
➔ After Bretton Woods, various countries
committed themselves to further global
economic integration through the
General Agreement on Tariffs and
Trade (GATT) in 1947 - main purpose
was to reduce tariffs and other
hindrances to free trade.
FINANCIAL SYSTEM
- A financial system is a set of
institutions, such as banks, insurance
companies, and stock exchanges, that
permit the exchange of funds.
- System that allows the transfer of
 money between savers and borrowers.
COMPONENTS OF FINANCIAL SYSTEM
1. FINANCIAL INSTITUTIONS
- act as intermediaries between
the lender and the borrower
when providing financial
services.
2. FINANCIAL MARKETS
- places where the exchange of
assets occurs with borrowers
and lenders, such as stocks,
bonds, derivatives, and
commodities.
3. FINANCIAL INSTRUMENTS
- These can include cash, shares
of stock (representing
ownership), bonds, options, and
futures.
4. FINANCIAL SERVICES
- provide investors a way of
managing assets and offer
protection against systemic risk.
Banks, insurance companies,
and investment services would
be considered financial services.
5. CURRENCY (MONEY)
- is a form of payment to
exchange products, services,and
investments and holds value to
society.
GLOBAL FINANCIAL SYSTEM
- refers to those financial institutions and
regulations that act on the international
level, as opposed to those that act on a
national or regional level.
- is basically a broader regional system
that encompasses all financial
institutions, borrowers, and lenders
within the global economy. In a global
view, financial systems include the
International Monetary Fund, central
banks, government treasuries and
monetary authorities, the World Bank,
and major private international banks.
TWO MAIN FUNCTIONAL
COMPONENTS
1. Global Capital Market
- Financial market that
brings buyers and
sellers together to trade
stocks, bonds,
currencies, and other
financial instruments.
2. Foreign Exchange Market
- A global marketplace
where currencies are
traded and determines
the exchange rates of
currencies to another.
INSTITUTIONS OF GLOBAL
FINANCIAL SYSTEM
● International Institutions
1. IMF- Keeps account of
international balance of
payment of members
states, also acts as a
lender of last resort
2. World Bank- Provide
funding, take up credit
risk and offer financial
favorable terms to
development projects in
developing countries
3. WTO- Negotiates
international trade
agreements, settles trade
disputes.
● Government Institutions
- Financial ministries, tax
authorities, central banks,
securities and exchange
commissions, etc.
● Private Participants
- Commercial banks, pension
funds, hedge funds, etc.
● Regional Institutions
- NAFTA, ASEAN, etc.
KEY FEATURES OF FINANCIALIZATION
 ● Liberalization of capital
account.
● Capital flows increasingly
taking the form of FDI and
portfolio investment.
● Inflation targeting priority over
growth, jobs, health, or other
social outcomes to protect the
value of investment capital.

FOREIGN INVESTMENT
1. Foreign Direct Investment
- Occurs when a firm invests
directly in facilities to produce
and/or market a product in a
foreign country.
- Also occurs when a firm buys
an existing enterprise in a
foreign country.
2. Foreign Portfolio Investment
- Investment in foreign financial
instruments (e.g. bonds/stocks)
- Does not involve taking a
significant equity stake in a
foreign business entity.