GLOBAL ECONOMY national governments, although other

MODULE 2 international institutions and other

organizations occasionally figure as
Definition of Global Economy shareholder.

 Also referred to as “WORLD Most of the prominent IFI’s are creations of

ECONOMY” multiple nations, although some bilateral
 Refers to the international financial institutions (created by two countries)
exchange of goods and services. exist and are technically IFI’s
 It may also means as the free
movement of goods, capital,
services, technology and The International Financial Institutions
information (IFIs) are:
Global Economy or Economic A. International Monetary Fund (IMF)
Globalization
B. Multilateral Development Banks
 It is concerned with globalization (MDBs) which include:
of production, finance, markets,
a. World Bank Group
technology, organizational
regimes, institutions, corporations b. African Development Bank
and labor.
 It is expanding since the c. Asian Development Bank
emergence of trans-national d. Inter-American Development
trade and increased exponentially Bank
due to the increase rate of
communication and technology. e. European Bank for
 The creation of world trade Reconstruction and Development
organizations made countries cut International Monetary Fund
down trade barriers and open up
their current accounts and capital The International Monetary Fund (IMF) is
accounts. a major financial agency and an international
financial institution funded by 190 member
Market Integration countries.
 Prices among different location or It is regarded as the global lender of last resort
related goods follow the same to national governments, and a leading
pattern over a long period of supporter of exchange-rate stability. Its stated
time, then market integration mission is "working to foster global monetary
exist cooperation, secure financial stability,
 When group of prices often move facilitate international trade, promote high
proportionally to each other and employment and sustainable economic growth,
when this relation is very clear and reduce poverty around the world.
among different markets, then
market is integrated. Multilateral Development Banks
 The market integration is an A multilateral development bank (MDB) is
indicator how much different a financial institution established by multiple
markets are related to each other member countries and falls under international
law. The owners of multilateral development
ROLE OF INTERNATIONAL FINANCIAL
banks are a national government and other
INSTITUTIONS IN THE CREATION OF
international institutions and organizations.
GLOBAL ECONOMY
The purpose of MDBs is to facilitate financing
International Financial Institutions (IFI) are
and provide advisory services for developing
chartered by more than one country and
countries. Multilateral development banks are
therefore are subjects to international law
also referred to as an international financial
institution (IFI).
The owners or shareholders are generally
 and equity investments to promote social and
economic development.
World Bank Group
ADB maximizes the development impact of its
World Bank, in full World Bank
assistance by facilitating policy dialogues,
Group, international organization affiliated
providing advisory services, and mobilizing
with the United Nations (UN) and designed
resources through cofinancing operations that
to finance projects that enhance the economic
tap official, commercial, and export credit
development of member states.
sources.
The World Bank is an international financial
Inter-American Development Bank
institution that provides loans and grants to the
governments of low-and middle-income The Inter-American Development Bank
countries for the purpose of pursuing capital (IDB) is a cooperative development bank
projects. founded in 1959 to accelerate the economic
and social development of its Latin American
African Development Bank
and Caribbean member countries. It is owned
The African Development Bank (ADB) is a by a total of 48 member countries, including
financial institution that funds projects that the U.S. and some European nations. The bank
promote economic and social progress provides financing in the form of loans and
throughout the continent. The bank is also grants.
known as Banque Africain de
The IDB assists Latin American and Caribbean
Développement. The bank has 54 member
countries in formulating development policies
states among the African nations and 26 non-
and provides financing and technical assistance
African member states.
to achieve environmentally sustainable
 The African Development Bank economic growth, increase competitiveness,
finances private and public enhance social equity, fight poverty, modernize
projects that promote economic the state, and foster free trade and regional
and social progress. integration.
 Core infrastructure such as
European Bank for Reconstruction and
highways and water systems are
Development
a priority.
 Its current major projects include The term European Bank for
the construction of a 745-mile Reconstruction and Development (EBRD)
from Lagos, Nigeria, to Abidjan, refers to a financial institution established in
Ivory Coast. 1991. The organization was developed to help
 Technical and vocation education Eastern European and ex-Soviet countries
for young Africans is another transitioning into democracies by
priority. developing free-market economies after the fall
 Public and private projects are of communism. The EBRD continues its work in
eligible for financing through the more than two dozen countries from Central
Bank. Europe to Central Asia, investing mainly in
 The African Development Fund private banks and businesses, including new
and the Nigeria trust fund ventures and existing companies.
operate under the umbrella of the
The European Bank for Reconstruction and
African Development Fund Group.
Development works in 38 different countries in
Asian Development Bank Southern and Eastern Mediterranean, Central
and Eastern Europe, and Central Asia. It is
The Asian Development Bank (ADB)
publicly owned by shareholders in 69 countries.
envisions a prosperous, inclusive, resilient, and
It only supports countries that are committed
sustainable Asia and the Pacific, while
to democratic principles. The organization also
sustaining its efforts to eradicate extreme
promotes environmentally sustainable
poverty in the region.
development and gender equality and promises
ADB assists its members, and partners, by to be fully transparent. The organization does
providing loans, technical assistance, grants, not finance projects related to the tobacco
industry, defense, certain alcoholic products,
stand-alone gambling facilities, or substances
banned by international law.

Main Objectives
 IMF provides temporary financial
assistance to member countries to help
ease balance of payments adjustments.
 MBDs provide financing for development
to developing countries through:
 long term loans (with maturities of
up to 20 years) at interest rates way
below market rates. Funding comes
from international capital markets
and relend to borrowing government
in developing countries.
 very long-term loans (sometimes
called credits with maturities of 30-
40 years) at interest rates below
market rates. Funding for loans
come from direct contributions by
government in the donor countries.
 grant financing by some MDBs for
technical assistance advisory service
or project preparation.