17 Aug Cross-Country Differences in Economic and Political Institutions:

Cross–Country Differences in Economic and Political Institutions:

1. What does country competitiveness mean? How is it related to but different from the comparative
advantage of a country? What are the key country–level factors that determine the competitiveness of a
country?
2. What are the key institutional conditions for the international competitiveness of a country? Why are
each of them important? In particular, what are the key advantages of a market–oriented economic
system in sustaining economic development and growth over a centrally–planned system such as the
type that the former Soviet Union and China used to have?
3. Why does the market sometimes fail to function due to the lack of government regulations? Give a real
or hypothetical sample to illustrate your point. What does externality mean? Why does this condition
tend to call for government regulation (use an example to illustrate your point)? What are the main
alternatives to regulation, and how can a society choose between regulation and its alternatives?
4. What is the proper role of the government in promoting economic development and growth? What
appear to be the key conditions for a country to achieve a quality of governance? Given that most
industrialized countries are democracies, can we say that democracy promotes economic development?
Why or why not? Given that most of the underdeveloped countries that experienced rapid economic
growth since the mid–1960s achieved the high growth under authoritarian regimes, can we say that
authoritarianism promotes economic growth? Why or why not?

Cross–Country Differences in Culture:

5. How do you define culture? How do scholars measure cultural differences? Specifically, explain the
four underlying dimensions that Geert Hofstede identified in his original study of IBM employees and
the 5th dimension that he and Michael Bond identified from their later work.
6. What is the distinction between values and norms? What differentiates folkways from mores? Give an
example for each of these two types of social norms in a specific cultural context that you are familiar
with and explain how important they are to foreigners doing business in the particular cultural context?
7. How is culture related to a country’s social, political and economic institutions? Identify some attribute (e.g., value or norm) a culture that you are
familiar with and discuss how it appears to relate to social, political or economic institutions of the
society of that culture.

Institutions of Global and Regional Economic Integration:

8. What are the main global economic institutions that serve to develop and maintain the framework of
international trade, investment, and finance? Specifically, be familiar with the basic functions of the
World Trade Organization (WTO), United Nations Conference on Trade and Development
(UNCTAD), International Monetary Fund (IMF), and the World Bank Group (including IBRD, IDA
and IFC).
9. What are the five levels of economic integration? What are the main steps that a group of countries
have to take to move up to each successively higher level of economic integration? What are the main
motivations for moving from each level of integration to the next higher level?
10. What are the trade creation effect and trade diversion effect of regional economic integration? Illustrate
each of these effects using a real or hypothetical example.
11. Understand the level of integration (measured against the criteria addressed in question 9 above) and
geographic location of such major regional economic integration arrangements as the EU,

NAFTA/USMCA and ASEAN as well as such regional integration or coordination efforts as
TPP/CPTPP, RCEP and APEC.

International Financial System:

12. Understand the different methods of foreign exchange quotations and be prepared to use them in foreign
exchange calculations. Understand what forward premium and discount mean and how to calculate
them. What is foreign exchange arbitrage? How does it differ from foreign exchange speculation?
13. What are the main determinants of foreign exchange rates? What is Purchasing Power Parity (PPP)?
Why is the PPP normally used as the main criterion (or equilibrium condition) for gauging whether a
country’s currency is undervalued or overvalued? How valid is PPP in determining exchange rates in
the short run and in the long run? What is Interest Rate Parity (IRP)? Under what conditions does IRP
hold?
14. What is foreign exchange rate overshooting? What gives rise to it? What does it imply for currency
stability and international management under the flexible exchange rate regime?
15. How does the fixed foreign exchange rate system operate typically? How does the current floating
foreign exchange rate system (e.g., as applicable to the exchange rate of the U.S. dollar to the euro)
operate? What are the main advantages and disadvantages of each system?
16. What does the balance of payments (BOP) mean? What are the main accounts in a country’s BOP?
Understand how a transaction between two countries (e.g., export of goods from country A to country
B or investment by a firm from country B in country A) affects the relevant BOP accounts of the two
countries.
17. Why do you think the U.S. has been running a current account deficit for so many years? Is the
persistent deficit a concern to you? Why or why not? Under what conditions will this be a serious
concern to people in the U.S. (and likely in the rest of the world)?

Strategies for Entering International Markets:

18. What is the distinction between exogenous uncertainty and endogenous uncertainty? Give an example
to illustrate the kind of new information a firm may be able to learn under each type of uncertainty in
an international business setting.
19. How does each type of uncertainty affect a firm’s timing of entry into a new foreign market? Try to
analyze the entry timing issue by considering each type of uncertainty and other factors that may also
have an influence (e.g., the size of investment required for the initial entry and competitive preemption).
20. Explain the advantages and limitations of the following market entry modes: export, licensing, joint
venture, acquisition and green field entry.