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Block 2, Session 5 - Economic
and financial flows in a globalised world…
Block 2, Session 5 - Economic
and financial flows in a globalised world
What?
When countries trade goods, services and capital with each other, they create inflows and outflows of money
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Global imbalances
A crisis can be defined as ‘a serious threat to the basic structure of the fundamental values and norms of a system, which under time pressure and highly uncertain circumstances necessitates making vital decisions’ (Rosenthal et al., 1989, pp. 2–4).
A crisis is thus characterised by uncertainty; a threat to the foundation on which a system is built; a sense of urgency that something needs to be done as quickly as possible (Boin et al., 2005).
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Role of multinationals
Multinationals are key modern economic actors that are responsible for a huge part of the economic and financial flows occurring in the global economic context. Implications can be positive and negative.
Improve consumers' lives, provide an estimated $280 billion worth of 'free' services
Two big faults - squashing competition and use the dark arts of management to stay ahead - failing to control would impact everyone
Market concentration - increase in mergers and acquisitions, may not be self correcting as once was
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The world needs a healthy dose of competition to keep today's giants on their toes and to give those in their shadow a chance to grow.
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Mutinational peculiarities:
- Choose where to keep cash
- Choose the currency in which to store cash
- Choose where their expenses (therefore profits) are recorded through transfer pricing