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International Business - Assignment

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Added on  2020-05-28

International Business - Assignment

   Added on 2020-05-28

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1.IntroductionInternational business often requires making crucial decisions regarding where to invest, how to invest and when to invest. The current scenario of the world economy presents an increasing dilemma on whether investment in emerging and developing countries is preferable to investment in advanced economies.[ CITATION Man16 \l 1033 ]Advanced economies offer developed markets and “have highly developed capital markets with high levels of liquidity, meaningful regulatory bodies, large market capitalization, and high levels of per capita income” and are generally considered as safe bets for investment.[ CITATION NAS12 \l 1033 ]. On the other hand, “emerging markets” also often referred to as developing countries are countries that are growing at a fast pace but have “less mature markets”. [ CITATION NAS12 \l 1033 ] Emerging markets offer opportunities for the future but tend to be volatile due to under-development of economic and political structures.[ CITATION Wad17 \l 1033 ]The “differentiated” levels of advancement country could be due to many reasons. [ CITATION Sam04 \l 1033 ]have described four major aspects of development, Human Resources or Human Capital, Natural Resources, Capital Formation, and technological development that determine the level of advancement of a country or whether a country can be called as an advanced country or a developing country. Advanced economies score well on most aspects of development, while emerging or low income could score low on several or all aspects of development.[ CITATION Sam04 \l 1033 ]However, the actual classification of countries as advanced, emerging markets or low income developing countries is by and large based on per capita income and their market structures. 2.Categorization of Economies Based on Level of DevelopmentThe International Monetary Fund uses the following criteria to classify countries into Advanced, emerging markets and developing economies. These criteria are a)Income Per Capita or the average individual income b) Diversification of Exports c) the level of integration of the country into the global financial systems.[ CITATION Int175 \l 1033 ]
International Business - Assignment_1
The World Bank simply classifies economies based on their Gross National Income Per Capita and these classifications are used by the International Monetary Fund to decide whether a country is a “advanced economies” or “emerging market and low income developing countries”. There are several methods to calculate the average individual income. However, one of the most common ones is Gross National Income (GNI) per capita. According to World Bank ,“GNI per capita is the gross national income, converted to U.S. dollars using the World Bank Atlas method, divided by the midyear population.”[ CITATION The2 \l 1033 ] In 2016, Low Income Developing Countries were defined as “Countries with a Gross National Income Per Capita of $1025 or less”, lower middle income countries were those with “GNI per capita of $1026 and $4035”, upper middle income countries were “those with a GNI per capita between $4036 and $12, 475” , and high income countries were countries with “GNI per capita of 12, 476 or more”. [CITATION The16 \l 1033 ]The IMF classifies 39 countries as advanced economies. These countries do not include some countries like Saudi Arabia that have high per capita income but lack diversity in export while some countries which do not necessarily have the highest levels of individual income are classified as advanced economies simply due to their advanced and integrated market structures. For example, Lithuania is included in the list of advanced economies due to its adoption of the Euro. Advanced economies are economies in the stages of post industrialization. [ CITATION Int175 \l 1033 ]The term “emerging markets” was first coined by Antoine van Agtmael in late 1980s to refer to the so called “third world countries” that were relatively poor but offered opportunities to investors as their stock markets were developing.[ CITATION Int174 \l 1033 ] Since then, the term has been evolved and been loosely used without any formal criterion for definition.[ CITATION Wad17 \l 1033 ] However, the International Monetary Fund publishes a list of “emerging market and developing economies” (including Low Income Developing Countries) that contains all those countries that are not classified as advanced economy countries. According to the World Economic Outlook of 2016, 152 countries were classified as emerging market and developing countries.[ CITATION Int16 \l 1033 ]The “emerging market and developing countries” are often referred to as “Low Income Developing Countries” (LIDCs). Low Income Developing countries are countries that would
International Business - Assignment_2

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