Various Stages of Economic Integration

Mentions the various stages of economic integration and gives examples.

According to Carbaugh (2009), the process of eliminating restrictions on international trade, payments and factor mobility, is known as economic integration. The stages of economic integration can be categorized into the following stages...Read more>>

United States - International Balance of Payments

Explains the contradictory situation which the United States faces: enjoys being a net recipient of interest payments despite a large external debt.

Carbaugh (2009) mentions that during a recession, both saving and investment tend to fall within an affected country. Th United States was able to recover its economy rapidly by mortgaging part of its wealth to foreigners during its recession of the early 1980s: its political stability and relatively high interest rates attracted investors from other countries to invest their funds in the United States. These funds were more than what the United States residents invested abroad. However, after World War I (1987), the United States had, for the first time incurred $23 billion and become a debtor nation...Read more>>

International Borrowing vs. Direct Foreign Investment

Discusses the advantages and disadvantages of international borrowing, and compares these borrowings compared with direct foreign investment.

International Borrowing

Advantages

International borrowing (Isgut 2001) is beneficial to (developing) countries: such finance can help speed up capital accumulation and encourage economic growth, allowing a smoother distribution of consumption expenses, making it possible to improve the living standard of citizens before the fruits of economic growth materialize. For example, prior to the Asian financial crisis, wealth created by export-led growth contributed to an investment boom in commercial/residential property, industrial assets and infrastructure. Thus, the construction industry flourished (i.e. more employment): much of this construction was financed via heavy borrowing from (foreign) banks, which were willing to lend as long as the value of property continued to rise (Hill, The Asian Financial Crisis)...Read more>>