Economic Integration
Economic integration is a term used to describe how different aspects between economies are integrated. Business and governments have created a range of institutions, treaties, and agreements that help to overcome trade differences and boost the free movement of trade, investment, and services across national boundaries. Any type of arrangement in which countries agree to coordinate their trade, fiscal, and/or monetary policies is referred to as economic integration.
Volbert A. and Mandler M. (April 2006) described the relation between economic integration, real output, and international trade on the example of the most integrated economy today between independent nations, the European Union. The process of integration in European countries is called a Maastricht-type integration process. Particularly, they studied the influence of the uncertainties, which take place as a result of the economic integration, on the international trade. They examined such types of uncertainties as uncertainty about exchange rate movements, uncertainty about inflation and interest rates, and political uncertainties. Finally they made a conclusion that “economic integration process has strong influences on volumes, directions, and types of international trade as well as the relative prices of export and import goods”. According the article decrease of uncertainties strongly influences on the economic variables like output and trade. Thus it supports international companies as their currency is not imposed by taxes. Also, according these authors, the economic integration causes the reduction of uncertainties in about real interests. Consequently a significant growth of domestic investment, real output, and trade take place.
Not less important fact is that such an economic integration process as in European Union also affects the countries outside the union because “a process of monetary integration significantly changes the types international trade between union...
View Full Essay