Positive And Negative Effects Of Globalization
The ability of a country to manage its exchange rate, balance of payments and foreign liabilities impacts on the perceptions of traders on world markets. Volatility of foreign exchange markets can contribute to external instability, and globalization has resulted in increased trade, requiring increased currency movements, there for market currencies are more prone to sudden appreciations and depreciations, altering a nation’s competitiveness, and debts levels. The improved access to international finance has detrimentally affected the external balance of many nations, in particular developing nations, as rising interest on massive loans can heavily outweigh the revenue eared, resulting in debt trap scenarios.
Additionally, the global movement toward free trade has resulted in many high income manufacturing nations increasing in there terms of trade through comparative advantage, and increasing there rates of economic growth. However, developing nations’ terms of trade tend to fall over time as prices for primary exports fall. This result in long term trade deficits and a worsening CAD that results in a deteriorating external balance, which generally maintains the income divide between the rich and poor nations with in the global