Question

How would you measure the level of globalization of a country or region? Or, what are globalization indicators?

• Please focus on economic and business globalization, finance in particular. Use theories and concepts learned from this course to state your viewpoint.
• Please discuss (list, identify, describe, outline, select, relate, or judge) from at least three different perspectives.
• Please reply and comment to at least one other participant. Complete your post by October 20th.

Answer 1

Economic globalization is measured by the actual flows of trade, foreign direct investment and portfolio investment, as well as the restrictions applying to these flows. Social globalization is expressed as the spread of ideas, information, images and people.

Economic indicators are key stats about the economy that can help you better understand where the economy is headed. These indicators can help investors decide when to buy or sell investments. For example, if the stock market is at its peak, you may want to sell. If the market is low and on the rise, you may want to buy. Economic indicators can help you understand this ebb and flow of the market, as well as other important financial factors. Here are several of the different types of economic indicators and how they may be used to understand the state of the economy.

Types of Economic Indicators

There are three types of economic indicators: leading, lagging and coincident.

Leading indicators point to future changes in the economy. They are extremely useful for short-term predictions of economic developments because they usually change before the economy changes.

Lagging indicators usually come after the economy changes. They are generally most helpful when used to confirm specific patterns. You can make economic predictions based on the patterns, but lagging indicators cannot be used to directly predict economic change.

Coincident indicators provide valuable information about the current state of the economy within a particular area because they happen at the same time as the changes they signal.

Top Economic Indicators and How They are Used:

• Gross Domestic Product (GDP)
• The Stock Market.
• Unemployment.
• Consumer Price Index (CPI)
• Producer Price Index (PPI)
• Balance of Trade.
• Housing Starts.
• Interest Rates.

1. Gross Domestic Product (GDP)

GDP is a lagging indicator. It is one of the first indicators used to gauge the health of an economy. It represents economic production and growth, or the size of the economy. Measuring GDP can be complicated, but there are two basic ways to measure it.

One measurement is the income approach. This approach adds up what everyone earned in a year, including gross profits for non-incorporated and incorporated firms, taxes less any subsidies and total compensation to employees. The other approach is the expenditure method. This method adds up what everyone spent in a year, including total consumption, government spending, net exports and investments. The results of these two measurements should be roughly the same. However, the expenditure method is the more common approach because it includes consumer spending, which is accounts for majority of a country’s GDP.

GDP is usually expressed in comparison to the previous quarter or year. For example, if the GDP of a country is up 2% in 2018, the economy of that country has grown 2% since the previous measurement of GDP in 2017. Annual GDP figures are often considered the best indicators for the size of the economy. Economists use two different types of GDP when measuring a country’s economy. Real GDP is adjusted for inflation, while nominal GDP is not adjusted for inflation.

An increase in GDP indicates that businesses are making more money. It also suggests an increase in the standard of living for people in that country. If GDP decreases, then it suggests the reverse.

The market’s responses to GDP shifts may also depend upon how one quarterly GDP measure compares to prior quarters, as well as how it compares to economists’ expectations for that current quarter.

2. The Stock Market

The stock market is a leading indicator. It’s also the indicator that most people look to first, even though it’s not the most important indicator.

Stock prices are partially based on what companies are expected to earn. If companies’ earnings estimates are accurate, the stock market can indicate the economy’s direction. For example, a down market could indicate that overall company earnings are expected to decrease and the economy could be headed toward a recission. On the other hand, an up market could suggest that earnings estimates are up and therefore the economy as a whole may be thriving.

3. Unemployment

Unemployment is a lagging indicator. The Bureau of Labor Statistics releases a monthly estimate of the cumulative number of jobs lost or created in the previous month, as well as a percentage figure that represents how many Americans are unemployed and actively looking for work.

This unemployment rate is determined through a monthly survey of 60,000 households. It estimates the proportion of Americans who were unemployed during the period when the survey was taken. The unemployment rate only reflects people who are unemployed and looking for work.

The non-farm payrolls represent the total number of workers employed by U.S. businesses, other than general government employees, workers in private households, employees of non-profit organizations that provide assistance to individuals and farm workers.