Economics of Competitive Advantage Essay Example for Free

Economics of Competitive Advantage EssayA globalized economy in its scheme entails opening up of the local economy of a certain country towards transnationalization, creating a borderless world economy. Thus, ideally, it should pave the way for economic interdependence and upraise economic fair play amongst participating countries. Globalization shall surely expose an economy towards the world market due to increased amount of global business deal and transfigures in products and services and by encouraging application for an open-economy.Globalization has imposed too many changes on the international monetary policies. On the separate hand, international monetary has seriously influenced apportion and investment policies, finance, tourism and many other aspects that atomic number 18 coincided with the modernity imposed by globalization. Moreover, open-economy principles have profoundly affected exchange set out policies on the macro level. Thus, international economic m igration has increased exposure towards international financial changes and commercial flows. (Frieden, p. 1)Moreover, according to Betts and Kehoe (2004), the aggregate real exchange 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 currency denomination of international trade widely influences the trade prices of goods and services. Thus, it also turns out that changes or sport in the on currency will decrease the buying 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 provide balance of trades and multi-lateral interacti on amongst participating nations. There are several factors that affect the bilateral rate movements which have significant economic effects.According to the Reserve Bank of Australia Bulletin (RBAB) (1998, p. 2) These are (1) divergences between export and meaning 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 little 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 political side behind changes in the market activity is also significant. This political-economic aspect is important nigh especially amongst developing nations. The emergence of developing countries and the continuing influence of strong countries amongst less empowered countries create domestic and international political pressures that are constitutional 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, powerful 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.