Economics of Competitive Advantage Essay

A globalized delivery in its theory entails opening up of the local economy of a certain country towards transnationalization, creating a borderless world economy. Thus, ideally, it should surface the way for economic interdependence and promote economic fair assemble amongst cloak countries. Globalization shall surely expose an economy towards the world grocery store due to increased amount of global trade and centrals in products and go and by encouraging application for an open-economy.Globalization has imposed too many an other(a)(prenominal) changes on the international monetary policies. On the other hand, international monetary has seriously influenced trade and investment policies, finance, tourism and many other expressions that be coincided with the modernity imposed by globalization. Moreover, open-economy principles befool profoundly locomoteed re-sentencing rate policies on the macro level. Thus, international economic migration has increased flick towar ds international financial changes and commercial flows. (Frieden, p. 1)Moreover, according to Betts and Kehoe (2004), the aggregate real change over rate movements are believed to be influenced by inter-country movements with regards to the relative prices of their traded goods within countries. Also, the silver denomination of international trade widely influences the trade prices of goods and services. Thus, it also turns come forth that changes or fluctuation in the on coin will decrement the get power of a particular currency if compared to other currencies that have less amount of fluctuations in their market.In addition, the strong market competitors in this case, are those who are believed to have strong economic relations with participating countries, thus they carry an edge towards their trade practices. Nevertheless, they dont act to stabilize world exchange rates, rather they only work to set aside balance of trades and multi-lateral interaction amongst participat ing nations. There are several factors that affect the bilateral rate movements which have significant economic effects.According to the grant Bank of Australia Bulletin (RBAB) (1998, p. 2) These are (1) divergences between export and import and aggregated trade-weighted exchange rates (2) role of US dollar as currency for international trade (3) longer-term pricing of commodity exports in terms of other major currencies and (4) importance of bilateral rates vis-a vis competitor countries with relatively weensy direct trade. These changes however, the depreciation or appreciation can create effects on international competitiveness.Moreover, aside from purely economic reasons of rate fluctuations, the policy-making side behind changes in the market activity is also significant. This political-economic aspect is important most especially amongst developing nations. The emergence of developing countries and the act influence of strong countries amongst less empowered countries cr eate domestic and international political pressures that are integral to the competitiveness of the participating countries (Freiden, p. 12)Thus, economically speaking, exchange rate fluctuations have impacts on the countrys competitiveness. Stability or non-stability of their currency has adverse effects on the currencys buying and trading power. On the political aspect, excluding the changes and fluctuations in the currency rates, omnipotent groups and powerful consumers affect international economic integration. And thus the openness of world economy therefore pushes more politicized movements and political pressures in the economic arena.