Video: Open economy in the modern world
2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:45
Surely everyone will agree that no country in the modern world is completely isolated from foreign economic relations. Ultimately, states consume more than they produce alone. This state of affairs leads to the stimulation and subsequent development of international trade, and in this case everyone benefits equally - both the exporting country and the importing state. Moreover, recently there has been a tendency for the movement of capital between the powers (investments, transfers, loans, etc.). That is why the macroeconomic model, of course, includes operations both in the domestic and foreign markets. In a word, it is an example of an open economy.
Open economy. Concept
The open economy is considered among specialists as a sphere widely integrated into the general economic system. We note some of its characteristic features. First of all, it is, of course, participation in the international division of labor, and the absence of obstacles to the export / import of goods, as well as the movement of capital between countries. Experts conventionally divide this sector of the economy into two types: small open economy andbig open economy. The first type is represented on the world market only in small shares. In this case, world prices and the interest rate are practically not affected. On the other hand, a large open economy (for example, Germany, the United States of America), or rather the countries belonging to it, have a significant part of the world's savings and investments themselves, therefore, they have a direct impact on all world prices.
Key indicators of the open economy
- Part of imported goods in consumption.
- Part of exported goods in production.
- Share of foreign investment versus domestic investment.
Building an open economy
The main trend of the post-war decades, according to experts, is the transition from closed farms to the open economy itself, that is, directed to the foreign market. It was the United States of America that was the first to announce the thesis of the formation of a completely new economy, freedom of trade. The goal was exclusively one - to impose on other states their rules and standards of communication in the international market. Indeed, after the Second World War, America came out victorious, and in practice proved its worth and prosperity, gradually offering steps for a completely different new economic order. This call was accepted by many states. Approximately since the 1960s, such processesare beginning to take off in a number of developing countries. Already in the 1980s, China joined their number, and the term “openness” itself entered many dictionaries. The gradual transition of the powers to an open economy plan was also largely stimulated by the decisions of transnational corporations, which around the world were rapidly opening subsidiaries and branches in order to develop new markets, thereby intermittent international economic exchange.
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