Economic and the world globalisationIt is a 2000word essay and its relating to assignment 4 - Economic and the world globalisation I have attached assignment 4 and instruction given for assignment 5...

Running Head: Economic and the world globalization
1
Economic and the world Globalization
Author’s Name
Affiliation
Economic and the world globalization
2
Introduction
“It has been said that arguing against globalization is like arguing against the laws of gravity”
– Kofi Annan, Former Secretary General of the United Nations (Annan, 2001).
Globalization has reduced the distance between various parts of the country and has
ought developed and developing economies closer to one another in various terms. There has
een rise in international activities of globalized nations like China and India which leads to
great transformation of the world through repressive regimes of common problems like poverty,
inflation, unemployment and fiscal deficit. There are various stances which suggest that
differences lie in unconventional policy measures on the basis of monetary as well as fiscal
policy implications. Monetary policy measures matters a lot in describing the globalized nature
of nations and its impact over the inflation rate and interest rate in the country over a period of
time. It has been found that there globalisation reinforces the inflationary impact over the
movements in exchange rates which can be incorporated through monetary policy horizon. In the
paper, economic and globalization of world economies are closely inter-linked providing the
credentials issues to be discussed in terms of monetary policy measures.
Monetary policy measures affecting globalization
In global economy, the cyclical disinflationary forces lead to reinforcement of the
movements in the exchange rate having considerable impact over the globalization activity of the
countries. Expansionary monetary policy measures increase the money supply in the economy
which leads to rise in the inflation rate in a country. It makes all the goods and services
expensive relative to the prices of similar items in other nations. Thereby, it has negative impact
Economic and the world globalization
3
over the exchange rate which reduces the purchasing power parity of the cu
ency and as a result,
it undermines the globalization activities of the economy. There have been few examples in the
past which affected the financial conditions of the nations and indirectly influence the rate of
interest trends leading to changes in the monetary actions and international trading policies
(Coleman, 2016).
The empirical modern theoretical assumptions make use of wage setting and price
theories creating rational expectations in determining the inflation rate of the country. Being
globalized countries, there has been perfect capital mobility between the countries leading to
establishment of interdependence in the foreign exchange market. The prices of goods are linked
on the basis of purchasing power parity which describes the price of the same basket of goods in
terms of domestic cu
encies of two different nations. It increases the flow of exports and
imports of goods and services making it easy for nations to become global players through
cu
ent account and capital account linkages. For instance, if any country has been suffering
from slowdown or recessionary condition, it will have negative impact over the growth rate and
inflation in its trading partners and neighbor countries as well. This is because of the linkage
channels and paths in finance and other globalized routes including monetary policy measures
which imply the interest rate theoretical determination in this regard (Bruno & Shinn, 2015).
The argumentative position of the globalization effect over maintaining the stability in
the prices lies in honoring the commitment for abso
ing the inflation dynamics in such a
manner that monetary policy measures do not create negative outcomes for the country.
Economic and the world globalization
4
Impact of globalization over inflation rate
Inflation rate is affected by globalization mainly because of two reasons. One is
movement of the economy from the equili
ium conditions determining price and quantity under
“without globalization” circumstances towards attainment of new equili
ium. It ultimately
changes the inflation rates as economy position moves towards “with globalization” point of
equili
ium. For instance, in case of Middle-East countries, globalization raises its financial
position through rising growth rates which ultimately
ing out changes in relative prices of oil
in terms of other commodities. It also pushes up the growth rates of globalized...