Openness in Goods & Financial Markets
- At September 26, 2012
- By Prateek Agarwal
- In Macroeconomics
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The Measure of Openness is the ratio of exports to GDP. In the USA, the measure of openness is 11%. Another measure is the ratio of exports to tradable goods. Tradable goods are goods like cars and computers, but exclude goods such as houses and haircuts. Sixty percent of total GDP are tradable goods.
Openness in Goods Markets: The ability of consumers to choose between domestic and foreign goods. No country has a completely open economy. Most countries resort to tariffs, quotas, and other types of restrictions.
Openness in Financial Markets: The ability of investors to choose between domestic assets and foreign assets. Most countries are trying to eliminate capital controls and move towards open capital markets.
Openness in Factor Markets: The ability of firms to choose where to operate and the ability of workers to choose where to work. Countries try to have free trade areas. However, movements of plants and labor have resulted in heated political debates in most countries.
