GLOBAL BUSINESS STRATEGY - IMF Essay Example | Topics and Well Written Essays - 1250 words

GLOBAL BUSINESS STRATEGY - IMF - Essay Example 3. State holds the authority of law and establishes adequate procedures. 4. The power of state has to be distributed and fragmented among different centers. Power at one center should be minimized. 5. Last, state eradicates the fragmentation of powers by dejecting the system of check and balance. Economic Nationalist Theory This theory focuses on developing, flourishing, and guarding national economies. It is widely used in the cases of world markets. Upsurge in the growth of national economies as a result of increased exports created the reality of national economies. This theory emphasizes that there must be a domestic control on capital formation, labor, and economy even if it requires imposition of quotas and tariffs to restrict the movements of goods, labor, and capital. The notion has been generated from the idea that a country would perform better if its local industries were protected from the international competitions. Some of the measures for implementing on this theory in clude Import Substitutions, Protectionism, and Mercantilism. Under this theory, the government or the state has extensive control on trade and economic matters. Currency depreciation, tariffs, export subsidies, and quota restrictions are some of the methods utilized by government to pursue economic nationalism. Structuralist Theory According to this theory, the disparities among economies of countries are a result of previously derived power relations. This theory advocates an emphasis on an economy with its interrelations with other elements and its totality rather than segregated elements in isolation. For example, the world economies in essence are intrinsically linked resulting in many economic problems as well. International Monetary Fund (IMF) International Monetary Fund (IMF) was developed in 1945 as an international organization. The primary purposes of this organization are: Promoting global exchange and monetary stability Facilitating the balanced growth and expansion of i nternational trade Aiding the development of multilateral system for prevalent transactions Nelson, (n.d.) stated that during the devaluation of Brazilian Currency, though it looked financially sound but the conditions that IMF provided them to follow were difficult to implement. In order to deal with the issue of inflations, Brazil introduced fixed exchange rate. IMF imposed those conditions for two reasons. First, to keep interest rates high so that foreign investors keep their investment in Brazil. Second, these interest rates would decline the growth of thereby reducing overall demand. If the economic nationalist theory would be implemented then the country would have full control on its economy and would not require any other institutions’ condition. In contrast to that, liberal theory undermines the sovereignty of Brazilian country over its economy and urges to outsource its department to an external, more competent organization. As per structuralism theory, the reason due to which Brazil is compelled to fulfill conditions of IMF is its past relations with this organization. Corning (n.d.) stated that the rescue package provided by IMF were not promising. A week after the IMF bailout, the Korean financial market experienced decline of 27% against dollar. Consumers were in panic as businesses and banks paralyzed. It was also