GLOBAL ECONOMY national
MODULE 2 international
Definition of Global Economy
 Also referred to as “WORLD
ECONOMY”
 Refers to the international
exchange of goods and services.
 It may also means as the free
movement of goods, capital,
services, technology and
information
Global Economy or Economic
Globalization
 It is concerned with globalization
of production, finance, markets,
technology, organizational
regimes, institutions, corporations
and labor.
 It is expanding since the
emergence of trans-national
trade and increased exponentially
due to the increase rate of
communication and technology.
 The creation of world trade
organizations made countries cut
down trade barriers and open up
their current accounts and capital
accounts.
Market Integration
 Prices among different location or
related goods follow the same
pattern over a long period of
time, then market integration
exist
 When group of prices often move
proportionally to each other and
when this relation is very clear
among different markets, then
market is integrated.
 The market integration is an
indicator how much different
markets are related to each other
ROLE OF INTERNATIONAL FINANCIAL
INSTITUTIONS IN THE CREATION OF
GLOBAL ECONOMY
International Financial Institutions (IFI) are
chartered by more than one country and
therefore are subjects to international law
The owners or shareholders are generally
governments, although other
institutions and other
organizations occasionally figure as
shareholder.
Most of the prominent IFI’s are creations of
multiple nations, although some bilateral
financial institutions (created by two countries)
exist and are technically IFI’s
The International Financial Institutions
(IFIs) are:
A. International Monetary Fund (IMF)
B. Multilateral Development Banks
(MDBs) which include:
a. World Bank Group
b. African Development Bank
c. Asian Development Bank
d. Inter-American Development
Bank
e. European Bank for
Reconstruction and Development
International Monetary Fund
The International Monetary Fund (IMF) is
a major financial agency and an international
financial institution funded by 190 member
countries.
It is regarded as the global lender of last resort
to national governments, and a leading
supporter of exchange-rate stability. Its stated
mission is "working to foster global monetary
cooperation, secure financial stability,
facilitate international trade, promote high
employment and sustainable economic growth,
and reduce poverty around the world.
Multilateral Development Banks
A multilateral development bank (MDB) is
a financial institution established by multiple
member countries and falls under international
law. The owners of multilateral development
banks are a national government and other
international institutions and organizations.
The purpose of MDBs is to facilitate financing
and provide advisory services for developing
countries. Multilateral development banks are
also referred to as an international financial
institution (IFI).

World Bank Group
World Bank, in full World Bank
Group, international organization affiliated
with the United Nations (UN) and designed
to finance projects that enhance the economic
development of member states.
The World Bank is an international financial
institution that provides loans and grants to the
governments of low-and middle-income
countries for the purpose of pursuing capital
projects.
African Development Bank
The African Development Bank (ADB) is a
financial institution that funds projects that
promote economic and social progress
throughout the continent. The bank is also
known as Banque Africain de
Développement. The bank has 54 member
states among the African nations and 26 non-
African member states.
 The African Development Bank
finances private and public
projects that promote economic
and social progress.
 Core infrastructure such as
highways and water systems are
a priority.
 Its current major projects include
the construction of a 745-mile
from Lagos, Nigeria, to Abidjan,
Ivory Coast.
 Technical and vocation education
for young Africans is another
priority.
 Public and private projects are
eligible for financing through the
Bank.
 The African Development Fund
and the Nigeria trust fund
operate under the umbrella of the
African Development Fund Group.
Asian Development Bank
The Asian Development Bank (ADB)
envisions a prosperous, inclusive, resilient, and
sustainable Asia and the Pacific, while
sustaining its efforts to eradicate extreme
poverty in the region.
ADB assists its members, and partners, by
providing loans, technical assistance, grants,
and equity investments to promote social and
economic development.
ADB maximizes the development impact of its
assistance by facilitating policy dialogues,
providing advisory services, and mobilizing
resources through cofinancing operations that
tap official, commercial, and export credit
sources.
Inter-American Development Bank
The Inter-American Development Bank
(IDB) is a cooperative development bank
founded in 1959 to accelerate the economic
and social development of its Latin American
and Caribbean member countries. It is owned
by a total of 48 member countries, including
the U.S. and some European nations. The bank
provides financing in the form of loans and
grants.
The IDB assists Latin American and Caribbean
countries in formulating development policies
and provides financing and technical assistance
to achieve environmentally sustainable
economic growth, increase competitiveness,
enhance social equity, fight poverty, modernize
the state, and foster free trade and regional
integration.
European Bank for Reconstruction and
Development
The term European Bank for
Reconstruction and Development (EBRD)
refers to a financial institution established in
1991. The organization was developed to help
Eastern European and ex-Soviet countries
transitioning into democracies by
developing free-market economies after the fall
of communism. The EBRD continues its work in
more than two dozen countries from Central
Europe to Central Asia, investing mainly in
private banks and businesses, including new
ventures and existing companies.
The European Bank for Reconstruction and
Development works in 38 different countries in
Southern and Eastern Mediterranean, Central
and Eastern Europe, and Central Asia. It is
publicly owned by shareholders in 69 countries.
It only supports countries that are committed
to democratic principles. The organization also
promotes environmentally sustainable
development and gender equality and promises
to be fully transparent. The organization does
not finance projects related to the tobacco
industry, defense, certain alcoholic products,
stand-alone gambling facilities, or substances
banned by international law.

Main Objectives
 IMF provides temporary financial
assistance to member countries to help
ease balance of payments adjustments.
 MBDs 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.