To what extent is it sustainable for countries to rely on the export Essay

To what extent is it sustainable for countries to rely on the export of manufactured goods to generate economic growth - Essay Example According to the export-led growth hypothesis (ELGH), it is not only through increased application of labour and capital that overall growth of the national economies is possible but this can also be done through raising the levels of exports. According to the proponents of ELGH, exports can serve as an â€Å"engine of growth.† (Smith, 2001, p. 1) This theory of export-led growth has ample practical support from various countries, especially the developing countries. In recent times, trade policies of many developing nations have indeed become similar as the common believe has been that liberalization aimed at promoting exports is the panacea for all growth ills. Many unsuccessful cases of import substitution, led to trade policy shift to export promotion. The success stories of East Asian nations such as Singapore, Taiwan, Hong Kong and South Korea with respect to manufacturing exports have inspired others to emulate the policy of export promotion even for themselves. However , in recent times the strategy of export-led growth has received a severe drubbing as the Japanese and South Korean manufacturing export-led growth have cooled down. A major global recession would certainly cause difficulties for unhindered growth of these export-led nations. This crisis-driven slump in exports have in many countries has accentuated the significance of generating more domestic demand. The theoretical link between economic growth and trade is centuries old. The earliest proponent of the positive relationship between trade and economic growth is the classical economist Adam Smith. Subsequently, other classical economists such as James Mills, John Stuart Mill, Ricardo and Torrens improved upon the theory of Smith. Since then, the positive impact of trade on the economy has been well established through indisputable benefits of international specialization and productivity gain. In this context, Ibrahim (2002)

HW Assignment Example | Topics and Well Written Essays - 250 words - 18

HW - Assignment Example It relates to the growth of MNC by evaluating the stages that an international product has to go through thus revealing product decline and appreciations as a result of competition c. Low home inflation will mean high consumption and less saving. This will in turn increase imports and reduce export thus increasing deficit in a country’s current account. Foreign imports will signify a strong competition thus low inflation. The demand for South Korean won will increase with the increase in demand for imports. The supply for South Korean won will reduce due to increase in its exports. The result will be a shift in equilibrium value of the South Korean won upwards, thus increasing its value. The high interest rates in US will increase demand for US currency as a result of hot money flows. This will see appreciation in US dollar demand for Argentina pesos will decrease, while its supply will increase. The equilibrium value for the pesos will thus depreciate Rise in income levels of US will increase demand and consumption thus increasing imports. The demand for British pounds will increase, while supply for British pound for sale will decrease, the equilibrium value of the British pound will increase thus signifying an appreciation in the value of British pound b. In speculating, the speculators who anticipate for appreciation of the currency will purchase the future contracts of the currency as opposed to those who anticipate the currency’s decline who will sell currency future contracts of that currency When the US based firm wants to lock its maximum price to be paid for euros in future, then the US firm can consider purchasing a call option for euros. Similarly, when the US firm wants the price of its receivables to be lock at minimum prices for the euros, then the US firm can consider put option on euros. A speculator should purchase a call option of Australian dollar when the Australian dollar is devalued and low compared