Set the Language

We weren't able to detect the audio language on your flashcards. Please select the correct language below.

Front

Back

Related Flashcards

Flashcards
»
Deardorff's Glossary of International Economics 1

Deardorff's Glossary Of International Economics 1

by MortenGranan, Sep. 2014

Subjects: economics international

Favorite

Add to folder

Flag

Shuffle
Toggle On

Toggle Off
Alphabetize
Toggle On

Toggle Off
Front First
Toggle On

Toggle Off
Both Sides
Toggle On

Toggle Off
Read
Toggle On

Toggle Off

Reading...

Front

Card Range To Study

through

Play button

Progress

1/1764

Click to flip

Use LEFT and RIGHT arrow keys to navigate between flashcards;

Use UP and DOWN arrow keys to flip the card;

H to show hint;

A reads text to speech;

1764 Cards in this Set

Front
Back

	Above the line	In balance of payments accounting, this refers to those transactions that are included in calculating the balance of payments surplus or deficit. Transactions below the line, typically official reserve transactions and sometimes short term capital flows, are not included.
	Absolute advantage	The ability to produce a good at lower cost, in terms of real resources, than another country. In a Ricardian model, cost is in terms of only labor. Absolute advantage is neither necessary nor sufficient for a country to export a good. See comparative advantage.
	Absolute advantage trade policy	The idea, advocated by opponents of globalization, that a country should import only goods in which other countries have an absolute advantage, particularly goods that the importing country cannot (or cannot "reasonably") produce itself.
	Absolute Purchasing Power Parity	See purchasing power parity.
	Absorption	Total demand for final goods and services by all residents (consumers, producers, and government) of a country (as opposed to total demand for that country's output). The term was introduced as part of the Absorption Approach.
	Absorption approach	A way of understanding the determinants of the balance of trade, noting that it is equal to income minus absorption. Due to Alexander (1952)
	Abundant	Available in large supply. Usually meaningful only in relative terms, compared to demand and/or to supply at another place or time. See factor abundance.
	Abundant factor	The factor in a country's endowment with which it is best endowed, relative to other factors, compared to other countries. May be defined by quantity or by price.
	Academic Consortium on International Trade	A group of academic economists and lawyers who are specialized in international trade policy and international economic law. ACIT's purpose is to prepare and circulate policy statements and papers that deal with important, current issues of international trade policy.
	Accession	The process of adding a country to an international agreement, such as the GATT, WTO, EU, or NAFTA.
	Accession country	A country that is waiting to become a member of the EU.
	Accommodating transaction	In the balance of payments, a transaction that is a result of actions taken officially to manage international payments; in contrast with autonomous transaction. Thus official reserve transactions are accommodating, as may be short-term capital flows that respond to expectations of intervention.
	Accumulation	The acquisition of an increasing quantity of something. The accumulation of factors, especially capital, is a primary mechanism for economic growth.
	ACE	Automated Commercial Environment
	ACIT	Academic Consortium on International Trade
	ACP Countries	A group of African, Caribbean, and Pacific less developed countries that were included in the Lomé Convention and now the Cotonou Agreement. As of June 2007, the group included 79 countries.
	ACS	Association of Caribbean States
	Actual protection rate	Implicit tariff.
	AD	Anti-dumping
	Ad valorem	Per unit of value (i.e., divided by the price).
	Ad valorem equivalent	The ad valorem tariff that would be equivalent, in terms of its effects on trade, price, or some other measure, to a nontariff barrier.
	Ad valorem tariff	Tariff defined as a percentage of the value of an imported good.
	ADB	1. African Development Bank Group
	ADB	2. Asian Development Bank
	ADD	Anti-dumping duty.
	Adjustable peg	An exchange rate that is pegged, but for which it is understood that the par value will be changed occasionally. This system can be subject to extreme speculative attack and financial crisis, since speculators may easily anticipate these changes.
	Adjusted for inflation	Corrected for price changes to yield an equivalent in terms of goods and services. The adjustment divides nominal amounts for different years by price indices for those years -- e.g. the CPI or the implicit price deflator -- and multiplies by 100. This converts to real values, i.e. valued at the prices of the base year for the price index.
	Adjustment assistance	Government program to assist those workers and/or firms whose industry has declined, either due to competition from imports (trade adjustment assistance) or from other causes. Such programs usually have two (conflicting) goals: to lessen hardship for those affected, and to help them change their behavior -- what, how, or where they produce.
	Adjustment mechanism	The theoretical process by which a market changes in disequilibrium, moving toward equilibrium if the process is stable. See Walrasian and Marshallian adjustment.
	Administered price	A price for a good or service that is set and maintained by government, usually requiring accompanying restrictions on trade if the administered price differs from the world price.
	Administered protection	Protection (tariff or NTB) resulting from the application of any one of several statutes that respond to specified market circumstances or events, usually as determined by an administrative agency. Several such statutes are permitted under the GATT, including anti-dumping duties, countervailing duties, and safeguards protection.
	Administrative agency	A unit of government charged with the administration of particular laws. In the United States, those most important for administering laws related to international trade are the ITC and ITA.
	Advance deposit requirement	A requirement that some proportion of the value of imports, or of import duties, be deposited prior to payment, without competitive interest being paid.
	Advanced country	Developed country.
	Advantage	Usually refers to a cost advantage, though it could refer to a strategic advantage (such as first mover advantage) or to a superiority of technology or quality.
	Adverse selection	The tendency for insurance to be purchased only by those who are most likely to need it, thus raising its cost and reducing its benefits.
	Adverse terms of trade	A terms of trade that is considered unfavorable relative to some benchmark or to past experience. Developing countries specialized in primary products are sometimes said to suffer from adverse or declining terms of trade.
	AEC	African Economic Community
	African Development Bank Group	A multinational development bank for Africa.
	African Economic Community	An organization of African countries that aims to promote economic, cultural and social development among the African economies. Among other things, it intends to promote the formation of FTAs and customs unions among regional groups within Africa that will eventually merge into an African Common Market.
	African Growth and Opportunity Act	U.S. legislation enacted May 2000 providing tariff preferences to African countries that qualify. As of May 2007, 38 countries had qualified.
	AFTA	ASEAN Free Trade Area
	Agenda 21	A plan of action adopted at the Rio Summit to promote sustainable development.
	Agent	1.An entity within the economy that makes economic decisions and engages on economic activity. Used to refer to individual consumers, households, and firms.
	Agent	2. One who acts on behalf of someone else.
	Agent	3. In Principal-Agent Theory, the person whose job it is to act to the benefit of someone else (the principal), but who may require some incentive to do so.
	Agglomeration	The phenomenon of economic activity congregating in or close to a single location, rather than being spread out uniformly over space.
	Agglomeration economy	Any benefit that accrues to economic agents as a result of having large numbers of other agents geographically close to them, thus tending to lead to agglomeration. This is a basic feature of the New Economic Geography.
	Aggregate	As an adjective or noun (with stress on the first syllable), this refers to the sum or total of multiple items. As a verb (with stress on the last syllable), this means to combine such items or add them up.
	Aggregate demand	The total demand for a country's output, including demands for consumption, investment, government purchases, and net exports.
	Aggregate measure of support	Variation of aggregate measurement of support.
	Aggregate measurement of support	The measurement of subsidy to agriculture used by the WTO as the basis for commitments to reduce the subsidization of agricultural products. It includes the value of price supports and direct subsidies to specific products, as well as payments that are not product specific.
	Aggregate production possibility frontier	The production possibility frontier, or curve obtained by adding the production possibilities of two or more countries or regions.
	Aggregate supply	The total supply of a country's output, usually assumed to be an increasing function of its price level in the short run but independent of the price level in the long run.
	Aggregate transformation curve	Aggregate production possibility frontier
	Aggregation	The combining of two or more kinds of an economic entity into a single category. Data on international trade necessarily aggregate goods and services into manageable groups. For macroeconomic purposes, all goods and services are usually aggregated into just one.
	AGOA	African Growth and Opportunity Act
	Agreement on Agriculture	See Agriculture Agreement.
	Agreement on Textiles and Clothing	The 10-year transitional program of the WTO to phase out the quotas on textiles and apparel of the MFA.
	Agricultural good	A good that is produced by agriculture. Contrasts with manufactured good.
	Agriculture	Production that relies essentially on the growth and nurturing of plants and animals, especially for food, usually with land as an important input; farming. Contrasts with manufacturing.
	Agriculture Agreement	The agreement within the WTO that commits member governments to improve market access and reduce trade-distorting subsidies in agriculture, starting with the process of tariffication.
	Aid	Assistance provided by countries and by international institutions such as the World Bank to developing countries in the form of monetary grants, loans at low interest rates, in kind, or a combination of these.
	ALADI	Asociación Latinoamericana de Integración (Spanish for Latin-American Integration Association)
	ALCA	Acuerdo de Libre Comercio de las Américas (Spanish for Free Trade Area of the Americas )
	ALCAN	Acuerdo de Libre Comercio de América del Norte (Spanish for North American Free Trade Agreement)
	Allocation	An assignment of economic resources to uses. Thus, in general equilibrium, an assignment of factors to industries producing goods and services, together with the assignment of resulting final goods and services to consumers, within a country or throughout the world economy.
	Allocative efficiency	Refers to whether or not an allocation is efficient. A change from an allocation that is not efficient, to one that is, may be termed an "increase" in allocative efficiency.
	Alternative Trade Adjustment Assistance	An addition to the US program of trade adjustment assistance, enacted in 2002, that provides wage insurance for a limited group of older workers.
	Amber box	The category of subsidies in the WTO the total value of which is to be reduced. The term is used primarily in the Agriculture Agreement and includes most domestic support measures that distort production and trade. Also called orange box. See box.
	Amicus brief	A document filed in a legal proceeding by an interested party who is not directly part of the case. In the WTO an issue has been whether to permit dispute settlement panels to accept such submissions, especially from NGOs.
	Amortization	The deduction of an expense in installments over a period of time, rather than all at once.
	Amplitude	The extent of the up and down movements of a fluctuating economic variable; that is, the difference between the highest and lowest values of the variable. See destabilizing speculation.
	AMS	Aggregate measure of support.
	Analytical technique	See technique of analysis.
	ANCERTA	Australia-New Zealand Closer Economic Relations Trade Agreement. Also ANZCERTA and just CER.
	Andean Community	An organization of five Andean countries -- Bolivia, Colombia, Ecuador, Peru, and Venezuela -- formed in 1997 out of the Andean Pact. It provides for economic and social integration, including regional trade liberalization and a common external tariff, as well as harmonization of other policies.
	Andean Pact	The Cartagena Agreement of 1969, which provided for economic cooperation among a group of five Andean countries; predecessor to the Andean Community.
	Andean Trade Promotion and Drug Eradication Act	US legislation enacted in 2002 authorizing the U.S. president to provide tariff preferences to countries in the Andean region in connection with the effort to curtail production of illegal drugs.
	Annecy Round	The second (1949) of the trade rounds conducted under the auspices of the GATT.
	Ante	See ex ante.
	Anti-dumping duty	Tariff levied on dumped imports. The threat of an anti-dumping duty can deter imports, even when it has not been used, and anti-dumping law is therefore a form of nontariff barrier.
	Anti-dumping suit	A complaint by a domestic producer that imports are being dumped, and the resulting investigation and, if dumping and injury are found, anti-dumping duty.
	Anti-trust policy	U.S. term for competition policy, motivated by it's initial purpose of breaking up trusts.
	AOA	Agreement on Agriculture
	APC	Average propensity to consume
	APEC	Asia-Pacific Economic Cooperation
	apparel	Clothing. The apparel sector is important for trade because, as a very labor intensive sector, it is a likely source of comparative advantage for developing countries. See textiles and apparel.
	Apparent consumption	Production plus imports minus exports, sometimes also adjusted for changes in inventories. The intention here is not to distinguish different uses for a good within the country, but only to infer the total that is used there for any purpose.
	Appellate Body	The standing committee of the WTO that reviews decisions of dispute settlement panels.
	Applied tariff rate	The actual tariff rate in effect at a country's border.
	Appreciate	See appreciation.
	Appreciation	A rise in the value of a country's currency on the exchange market, relative either to a particular other currency or to a weighted average of other currencies. The currency is said to appreciate. Opposite of "depreciation."
	Arab League	Informal name of the League of Arab States.
	Arbitrage	A combination of transactions designed to profit from an existing discrepancy among prices, exchange rates, and/or interest rates on different markets without risk of these changing. Simplest is simultaneous purchase and sale of the same thing in different markets, but more complex forms include triangular arbitrage and covered interest arbitrage.
	Arc elasticity	See elasticity
	Argument for protection	A reason given (not necessarily a good one) for restricting imports by tariffs and/or NTBs.
	Armington assumption	The assumption that internationally traded products are differentiated by country of origin. Due to Armington (1969) in an international macroeconomic context, but now a standard assumption of international CGE models, used to generate smaller and more realistic responses of trade to price changes than implied by homogeneous products.
	Armington elasticity	The elasticity of substitution between products of different countries.
	Article	A specific section of a negotiated agreement.
	Article XIX	The Safeguards Clause of the GATT.
	Article XXIV	The article of the GATT that permits countries to form free trade areas and customs unions as exceptions to the MFN principle.
	AS-AD	The model and/or diagram that determines the level of aggregate economic activity through the interaction of aggregate supply and aggregate demand.
	ASEAN	Association of Southeast Asian Nations
	ASEAN Free Trade Area	A free trade area announced in 1992 among the ASEAN countries that is in the process of being implemented.
	Asia-Pacific Economic Cooperation	An organization of countries in the Asia-Pacific region, launched in 1989 and devoted to promoting open trade and practical economic cooperation. As of June 2007, APEC had 21 member countries.
	Asian Crisis	A major financial crisis that began in Thailand in July 1997 and quickly spread to other East Asian countries.
	Asian Development Bank	A multilateral institution based in Manila, Philippines, that provides financing for development needs in countries of the Asia-Pacific region. As of June 2007, ADB had 44 developing member countries.
	Asian Tigers	The Four Tigers.
	Asset	An item of property, such as land, capital, money, a share in ownership, or a claim on others for future payment, such as a bond or a bank deposit.
	Asset approach	A theory of determination of the exchange rate that focuses on its role as the price of an asset. With high capital mobility, equilibrium requires that expected returns on comparable domestic and foreign assets be the same.
	Asset bubble	See bubble.
	Asset position	See net foreign asset position.
	Assignment problem	How to use macroeconomic policies to achieve both internal balance and external balance; specifically, with only monetary and fiscal policies available under fixed exchange rates, which instrument should be "assigned" to which goal? Mundell (1962) showed that monetary policy should be assigned to external balance.
	Assimilative capacity	The extent to which the environment can accommodate or tolerate pollutants.
	Association Agreement	Early predecessor to the Europe Agreements but excluding provision for political dialogue.
	Association of Caribbean States	A group of 25 countries of the Caribbean that signed a convention in 1994 to foster "consultation, cooperation and concerted action."
	Association of Natural Rubber Producing Countries	An inter-governmental organization, formed by natural rubber producing countries to promote the overall interests of the commodity. See international commodity agreement.
	Association of Southeast Asian Nations	An organization of countries in southeast Asia, the purpose of which is to promote economic, social, and cultural development as well as peace and stability in the region. Starting with five member countries in 1967, it had expanded to ten members as of June 2007.
	ASWP	Any safe world port. Meaning that the product offered with this designation will be delivered to essentially anywhere in the world.
	Asymmetric information	The failure of two parties to a transaction to have the same relevant information. Examples are buyers who know less about product quality than sellers, and lenders who know less about likely default than borrowers. Both are common in international markets.
	Asymmetric shock	An exogenous change in macroeconomic conditions affecting differently the different parts of a country, or different countries of a region. Often mentioned as a source of difficulty for countries sharing a common currency, such as the Euro Zone.
	At par	At equality. Two currencies are said to be "at par" if they are trading one-for-one. The significance is more psychological then economic, but the long decline of the Canadian dollar "below par" with the U.S. dollar, and the more recent variation of the euro between above and below par, also with the U.S. dollar, has been cause for concern.
	At sight	See payment at sight.
	ATAA	Alternative Trade Adjustment Assistance
	ATC	Agreement on Textiles and Clothing
	ATPDEA	Andean Trade Promotion and Drug Eradication Act
	Attrition	The decline in employment in a firm or industry that occurs naturally due to workers' quitting or retiring. The pain of shrinking an industry due, say, to trade liberalization is minimized if it can be accomplished through attrition. In the UK, attrition is called natural wastage.
	Australia-New Zealand Closer Economic Relations Trade Agreement	A free trade agreement formed in 1983 between Australia and New Zealand. Said to be one of the most comprehensive bilateral free trade agreements in the world, it was also the first to include trade in services. Identified as ANCERTA, ANZCERTA, and CER.
	Autarkic	Associated with the situation of autarky.
	Autarky	The situation of not engaging in international trade; self-sufficiency. (Not to be confused with "autarchy," which in at least some dictionaries is a political term rather than an economic one, and means absolute rule or power.)
	Autarky equilibrium	In a model of an economy, the configuration of prices and quantities at which quantities supplied and demanded within the economy are equal, so that no trade would take place even if it were permitted.
	Autarky price	Price in autarky; that is, the price of something within a country when it is not traded by that country. Relative autarky prices turn out to be the most theoretically robust (but empirically elusive) measures of comparative advantage.
	Auto Pact	See Canada-US Auto Pact.
	Automated Commercial Environment	ACE is an online system developed by U.S. Customs and Border Protection to process international trade.
	Automatic licensing	The licensing of imports or exports for which licenses are assured, for gathering information, or as a holdover from when licenses were not automatic. Depending on how the licensing is administered, automatic licensing can add to the bureaucratic and/or time cost of trade.
	Automatic stabilizer	An institutional feature of an economy that dampens its macroeconomic fluctuations, e.g., an income tax, which acts like a tax increase in a boom and a tax cut in a recession.
	Autonomous	Refers to an economic variable, magnitude, or entity that is caused independently of other variables that it may in turn influence; exogenous.
	Autonomous consumption	That portion of consumption that is autonomous. For example, if the consumption function has the form C=C0+cY, where C0 and c are parameters and Y is income, then C0 may be called autonomous consumption. An increase in autonomous consumption then represents an upward shift in the consumption function.
	Autonomous transaction	In the balance of payments, a transaction that is not itself a result of actions taken officially to manage international payments; in contrast with accommodating transaction.
	Availability theory	A theory of the determinants of international trade, due to Kravis (1956), that says that countries import what they do not have available domestically and export what they do. The theory can be said to encompass explanations of trade that stress factor endowments, technological differences, and product differentiation.
	Average cost	Total cost divided by output.
	Average product	The average product of a factor in a firm or industry is its output divided by the amount of the factor employed.
	Average propensity	The fraction of total income spent on an activity, such as consumption or imports. See propensity.
	Average propensity to consume	The fraction of total (or perhaps disposable) income spent on consumption. Contrasts with marginal propensity to consume.
	Average propensity to import	The fraction of total income spent on imports; thus the ratio of imports to GDP. Contrasts with marginal propensity to import.
	Average tariff	An average of a country's tariff rates. This can be calculated in several ways, none of which are ideal for representing how protective the country's tariffs are. Most common is the trade-weighted average tariff, which under-represents prohibitive tariffs, since they get zero weight.
	Back office	Refers to the activities of a firm that are necessary to its functioning but are not directly part of production, such as accounting. Such activities, despite the name that suggests a location behind the shop or shop floor, are increasingly done at remote locations, including in other countries, as business process outsourcing.
	Backward bending	Refers to a curve that reverses direction, usually if, after moving out away from an origin or axis, it then turns back toward it. The term is used most frequently to describe supply curves for which the quantity supplied declines as price rises above some point, as may happen in a labor supply curve, the supply curve for foreign exchange, or an offer curve.
	Backward indexation	The setting of wages based in part on past performance of prices.
	Backward integration	Acquisition by a firm of its suppliers.
	Backward linkage	The use by one firm or industry of produced inputs from another firm or industry.
	BAFFLING PIGS and DUKS	Acronyms for the 12 original members and non-members of the Euro Zone. BAFFLING PIGS = Belgium, Austria, Finland, France, Luxembourg, Ireland, Netherlands, Germany, Portugal, Italy, Greece, and Spain. DUKS = Denmark, United Kingdom, and Sweden.
	Balance of indebtedness	See net foreign asset position.
	Balance of merchandise trade	The value of a country's merchandise exports minus the value of its merchandise imports.
	Balance of payments	1. A list, or accounting, of all of a country's international transactions for a given time period, usually one year. Payments into the country (receipts) are entered as positive numbers, called credits; payments out of the country (payments) are entered as negative numbers called debits.
	Balance of payments	2. A single number summarizing all of a country's international transactions: the balance of payments surplus.
	Balance of payments adjustment mechanism	Any process, especially any automatic one, by which a country with a payments imbalance moves toward balance of payments equilibrium. Under the gold standard, this was the specie flow mechanism.
	Balance of payments argument for protection	A common reason for restricting imports, especially under fixed exchange rates, when a country is losing international reserves due to a trade deficit. It can be said that this is a second best argument, since a devaluation could solve the problem without distorting the economy and therefore at smaller economic cost.
	Balance of payments deficit	A negative balance of payments surplus.
	Balance of payments equilibrium	Meaningful only under a pegged exchange rate, this referred to equality of credits and debits in the balance of payments using a traditional definition of the capital account. A surplus or deficit implied changing official reserves, so that something might ultimately have to change.
	Balance of payments surplus	A number summarizing the state of a country's international transactions, usually equal to the balance on current account plus the balance on financial account, but excluding official reserve transactions, or omitting also other volatile short-term financial-account transactions. It indicates the stress on a regime of pegged exchange rates.
	Balance of trade	The value of a country's exports minus the value of its imports. Unless specified as the balance of merchandise trade, it normally incorporates trade in services, including earnings (interest, dividends, etc.) on financial assets.
	Balance on capital account	A country's receipts minus payments for capital account transactions.
	Balance on current account	A country's receipts minus payments for current account transactions. Equals the balance of trade plus net inflows of transfer payments.
	Balanced budget	1. A government budget surplus that is zero, thus with net tax revenue equaling expenditure.
	Balanced budget	2. A balanced budget change in policy or behavior is one in which a component of the government budget, usually taxes, is adjusted as necessary to maintain a balanced budget.
	Balanced growth	Growth of an economy in which all aspects of it, especially factors of production, grow at the same rate.
	Balanced trade	1. A balance of trade equal to zero.
	Balanced trade	2. The assumption that the balance of trade must be zero in equilibrium, as would be the case with a floating exchange rate and no capital flows. This is a standard assumption in real models of international trade, which exclude financial assets.
	Balassa index	See revealed comparative advantage.
	Balassa-Samuelson Effect	The hypothesis that an increase in the productivity of tradables relative to nontradables, if larger than in other countries, will cause an appreciation of the real exchange rate. Due to Balassa (1964) and Samuelson (1964).
	Baldwin envelope	The consumption possibility frontier for a large country, constructed as the envelope formed by moving the foreign offer curve along the country's transformation curve. Due to Baldwin (1948).
	Banana war	A trade dispute between the EU and the U.S. over EU preferences for bananas from former colonies. On behalf of U.S.-owned companies exporting bananas from South America and the Caribbean, the U.S. complained to the WTO, which ruled in favor of the U.S.
	Bancor	The international currency proposed by Keynes for use as the basis for the international monetary system that was being constructed at the end of World War II. Instead, the Bretton Woods System that emerged was based on the U.S. dollar. See also new bancor.
	Bank for International Settlements	An international organization that acts as a bank for central banks, fostering cooperation among them and with other agencies.
	Bank rate	The interest rate charged by a central bank to commercial banks for very short term loans; the discount rate.
	Barcelona Process	The Euro-Mediterranean Partnership.
	Barrier	1. Any impediment to the international movement of goods, services, capital, or other factors of production. Most commonly a trade barrier.
	Barrier	2. An entry barrier.
	Barter	The exchange of goods for goods, without using money.
	Barter economy	An economic model of international trade in which goods are exchanged for goods without the existence of money. Most theoretical trade models take this form in order to abstract from macroeconomic and monetary considerations.
	Base money	Monetary base.
	Base year	The year used as the basis for comparison by a price index such as the CPI. The index for any year is the average of prices for that year compared to the base year; e.g., 110 means that prices are 10% higher than in the base year. The base year is also the year whose prices are used to value something in real terms or after adjusting for inflation.
	Basel Capital Accord	Also known at Basel I, this was an agreement in 1988 by the Basel Committee of central bankers to measure the credit risk of commercial banks and set minimum standards for bank capital in order to reduce the likelihood of international repercussions due to bank failures.
	Basel I	The Basel Capital Accord
	Basel II	A substantially revised set of standards for capital adequacy of banks, with an agreed text first issued in June 2004.
	Basic balance	One of the more frequently used measures of the balance of payments surplus or deficit under pegged exchange rates, the basic balance was equal to the current account balance plus the balance of long-term capital flows.
	Basic import price	See minimum price system.
	Basic needs	See living wage.
	Basis point	One one-hundredth of a percentage point. Small changes in interest rates are commonly measured in basis points.
	Basket	See currency basket.
	Bastable's test	One of two conditions needed for infant industry protection to be welfare-improving, this requires that the protected industry be able to pay back an amount equal to the national losses during the period of protection. See also Mill's test.
	BEA	Bureau of Economic Analysis
	Beachhead effect	The idea that if costs of entering a market, such as through exports, become sunk costs, then a temporary change in market conditions such as an exchange rate can cause a lasting change in trade patterns. As one explanation for hysteresis in international trade, this was named by Baldwin (1988).
	Beef hormone case	A trade dispute that began in 1989 when the EC banned imports of beef from cows that had been injected with growth hormones, arguing that the health effects of these hormones were suspect. The U.S. eventually complained under the WTO in 1996, arguing the absence of scientific evidence of any harm, and in 1997 the WTO panel agreed with the U.S.
	Beggar thy neighbor	For a country to use a policy for its own benefit that harms other countries. Examples are optimal tariffs and, in a recession, tariffs and/or devaluation to create employment.
	Bell Trade Act	Enacted by the US Congress in 1946, this specified economic conditions for Philippine independence from the US, including the exchange rate, access to resources, and trade barriers. Some of this was revised in the Laurel-Langley Agreement.
	Below the line	See above the line.
	Benefit-cost analysis	Same as cost-benefit analysis.
	Benelux	1. A word referring to a grouping of the three countries, Belgium, Netherlands, and Luxembourg. Claimed by The Economist (May 3, 2008) to have been coined in August 1946 by its Belgian correspondent.
	Benelux	2. The economic union of the three Benelux countries, initially a customs union, later an economic union, and now part of the European Union.
	Benign neglect	Refers to doing nothing about a problem, in the hope that it will not be serious or will be solved by others. Said to be U.S. policy toward its balance of payments deficit in the late 1960s, based on other countries' need for dollar reserves.
	Bergsonian social welfare function	A social welfare function that takes as arguments only the levels of utility of the individuals in society. Due to Bergson (1938) as interpreted by Samuelson (1981). Also called a Bergson-Samuelson social welfare function.
	Bertrand competition	The assumption, sometimes assumed to be made by firms in an oligopoly, that other firms hold their prices constant as they themselves change behavior. Contrasts with Cournot competition. Both are used in models of international oligopoly, but Cournot competition is used more often.
	Bias	1. Bias of technology, either change or difference, refers to a shift towards or away from use of a factor. The exact meaning depends on the definition of neutral used to define absence of bias. Factor bias matters for the effects of technological progress on trade and welfare.
	Bias	2. Bias of a trade regime refers to whether the structure of protection favors importables or exportables, based on comparing their effective rates of protection. If these are equal, the trade regime is said to be neutral.
	Bias	3. Bias of growth refers to economic growth through factor accumulation and/or technological progress and whether if favors one sector or another. Growth is said to be export biased if the export sector expands faster than the rest of the economy, import biased if the import-competing sector does so.
	Biased growth	See bias.
	Bickerdike-Robinson-Metzler Condition	In the elasticities approach to analyzing effects of exchange rates, the condition for a depreciation to have a positive effect on the trade balance: [hX hM (1 + eX + eM) – eX eM (1 – hX – hM)] / [(eX + hX)(eM + hM)] > 0, where eI (hI) is the supply (demand) elasticity of I=X,M exports and imports respectively. If supply elasticities are infinite, it reduces to the Marshall-Lerner Condition. Due to Bickerdike (1920), Robinson (1947), and Metzler (1948).
	Bicycle Theory	With regard to the process of multilateral trade liberalization, the theory that if it ceases to move forward (i.e., achieve further liberalization), then it will collapse (i.e., past liberalization will be reversed). The idea was suggested by Bergsten (1975) and named by him in Bergsten and Cline (1982, p. 71), if not before.
	BID	Banco Interamericano de Desarrollo (Spanish for Inter-American Development Bank)
	Bid/ask spread	The difference between the price that a buyer must pay on a market and the price that a seller will receive for the same thing. The difference covers the cost of, and provides profit for, the broker or other intermediary, such as a bank on the foreign exchange market.
	Big Mac Index	An index of PPP exchange rates based solely on the prices of the Big Mac sandwich in McDonald's restaurants around the world, published each spring by the Economist.
	Bilateral	Between two countries, in contrast to plurilateral and multilateral.
	Bilateral agreement	An agreement between two countries, as opposed to a multilateral agreement.
	Bilateral aid	Aid from a single donor country to a single recipient country, in contrast to multilateral aid.
	Bilateral exchange rate	The exchange rate between two countries' currencies, defined as the number of units of either currency needed to purchase one unit of the other.
	Bilateral quota	An import (or export) quota applied to trade with a single trading partner, specifying the amount of a good that can be imported from (exported to) that single country only.
	Bilateral trade	The trade between two countries; that is, the value or quantity of one country's exports to the other, or the sum of exports and imports between them.
	Bilateral transfer	A transfer payment from one country to another.
	Bill of exchange	Any document demanding payment.
	Bill of lading	The receipt given by a transportation company to an exporter when the former accepts goods for transport. It includes the contract specifying what transport service will be provided and the limits of liability.
	Binding	1. As an adjective, this refers to a restriction that is met exactly, and is therefore having an effect on behavior, in contrast to nonbinding.
	Binding	2. As a noun, see tariff binding.
	BIS	Bank for International Settlements
	Black market	An illegal market, in which something is bought and sold outside of official government-sanctioned channels. Black markets tend to arise when a government tries to fix a price without itself providing all of the necessary supply or demand. Black markets in foreign exchange almost always exist when there are exchange controls.
	Bloc	See trading bloc.
	Blue box	A special category of subsidies permitted under the WTO Agriculture Agreement, it includes payments that are linked to production but with provisions to limit production through production quotas or requirements to set aside land from production. See box.
	BM	Banco Mundial (Spanish for World Bank)
	Bond	A debt instrument, issued by a borrower and promising a specified stream of payments to the purchaser, usually regular interest payments plus a final repayment of principal. Bonds are exchanged on open markets including, in the absence of capital controls, internationally, providing a mechanism for international capital mobility.
	Bond market	The market for bonds, in which the prices of the bonds, and therefore the corresponding interest rates, are determined by the interaction of buyers and sellers.
	Bonded warehouse	See foreign trade zone.
	Boom-bust cycle	A pattern of performance over time in an economy or an industry that alternates between extremes of rapid growth (booms) and extremes of slow growth or decline (busts), as opposed to sustained steady growth. For an economy, this indicates an extreme form of the business cycle.
	BOP	Balance of payments.
	Border effect	A discontinuity that exists in prices or in quantities of trade at the border between countries. If the price of a good is higher on one side of a border than the other, this is a border effect. If a gravity equation includes a dummy for trade across a border and that dummy is significant, that also indicates a border effect.
	Border measure	Border protection
	Border price	The price of a good at a country's border.
	Border protection	1. In the context of trade policy, this refers to policies such as tariffs and quotas that enhance profits and employment in a domestic industry, as opposed to other policies such as production subsidies that might have similar effects without restricting trade.
	Border protection	2. Measures to prevent unwanted entry across a nation's border of illegal or harmful goods or people.
	Border tax adjustment	Rebate of indirect taxes (taxes on other than direct income, such as a sales tax or VAT) on exported goods, and levying of them on imported goods. May distort trade when tax rates differ or when adjustment does not match the tax paid.
	Borderless world	The concept that national borders no longer matter, perhaps for some specified purpose.
	Borrowing	The amount that an entity, usually a country or its government, has borrowed. Thus often the (negative of) the net foreign asset position or the national debt.
	BOT	Balance of trade.
	Bound rate	See tariff binding.
	Bound tariff	See tariff binding.
	Bowed	Curved. "Bowed out" is used to describe a typical transformation curve, which is concave to the origin. In contrast, a transformation curve reflecting increasing returns to scale might be "bowed in" toward the origin.
	Box	Used with a color, a category of subsidies based on status in WTO: red=forbidden, amber or orange=go slow (i.e., reduce the subsidy), green=permitted, blue=subsidies tied to production limits. Terminology seems only to be used in agriculture, where in fact there is no red box.
	Box diagram	The Edgeworth Box.
	Boycott	To protest by refusing to purchase from someone, or otherwise do business with them. In international trade, a boycott most often takes the form of refusal to import a country's goods.
	BP-Curve	In the Mundell-Fleming model, the curve representing balance of payments equilibrium. It is normally upward sloping because an increase in income increases imports while an increase in the interest rate increases capital inflows. The curve is used under pegged exchange rates for effects on the balance of payments and under floating rates for effects on the exchange rate.
	BPO	Business process outsourcing
	Brain drain	The migration of skilled workers out of a country. First applied to the migration of British-trained scientists, physicians, and university teachers in the early 1960's, mostly to the United States.
	Branch plant economy	An economy that relies heavily on branch plants, i.e., production subsidiaries, of foreign companies, and therefore on foreign-owned capital and technology.
	Brecher-Alejandro Proposition	The proposition, proved in Brecher and Alejandro (1977), that foreign capital inflows with full repatriation must be immizerizing.
	Bretton Woods	A town in New Hampshire at which a 1944 conference launched the IMF and the World Bank. These, along with the GATT/WTO became known as the Bretton Woods Institutions, and together they comprise the Bretton Woods System.
	Bribe	A payment made to person, often a government official such as a customs officer, to induce favorable treatment.
	BRICs	Acronym for four large low-income countries, Brazil, Russia, India, and China, that were growing rapidly in the early years of the 21st century. Term was coined by researchers at Goldman Sachs in 2003, reflecting their expectation that the BRICs would eventually dominate the world economy.
	Broker's fee	The fee for a transaction charged by an intermediary in a market, such as a bank in a foreign-exchange transaction.
	Brown field investment	FDI that involves the purchase of an existing plant or firm, rather then construction of a new plant. Contrasts with green field investment.
	Brussels Tariff Nomenclature	An international system of classification for goods that was once widely used for specifying tariffs. It was changed, in name only, to the CCCN in 1976 and later superseded by the Harmonized System of Tariff Nomenclature
	BTN	Brussels Tariff Nomenclature
	Bubble	A rise in the price of an asset based not on the current or prospective income that it provides but solely on expectations by market participants that the price will rise in the future. When those expectations cease, the bubble bursts and the price falls rapidly.
	Bubble economy	Term for an economy in which the presence of one or more bubbles in its asset markets is a dominant feature of its performance. Japan was said to be a bubble economy in the late 1980s.
	Budget constraint	1. For an individual or household, the condition that income equals expenditure (in a static model), or that income minus expenditure equals the value of increased asset holdings (in a dynamic model).
	Budget constraint	2. For a country, the condition that the value of exports equals the value of imports or, if capital flows are permitted, that exports minus imports equals the net capital outflow. It is equivalent to income from production equaling expenditure on goods plus net acquisition of foreign assets.
	Budget constraint	3. The curve, usually a straight line, representing either of these conditions.
	Budget deficit	The negative of the budget surplus; thus the excess of expenditure over income.
	Budget surplus	Refers in general to an excess of income over expenditure, but usually refers specifically to the government budget, where it is the excess of tax revenue over expenditure (including transfer and interest payments).
	Buffer stock	A large quantity of a commodity held in storage to be used to stabilize the commodity's price. This is done by buying when the price is low and adding to the buffer stock, selling out of the buffer stock when the price is high, hoping to reduce the size of price fluctuations. See international commodity agreement.
	Building bloc	Or building block. See stumbling bloc.
	Built-in Agenda	Issues that were scheduled for continued negotiations within the WTO in the Uruguay Round agreement. In addition to reviewing the implementation of various agreements, these included negotiations for further liberalization in agriculture and services.
	Built-in stabilizer	Automatic stabilizer.
	Bureau of Economic Analysis	The government agency within the United States Department of Commerce that collects macroeconomic data, especially the National Income and Product Accounts, as well as data on balance of payments and international investment.
	Business	1. A firm.
	Business	2. The activities engaged in by firms.
	Business cycle	The pattern followed by macroeconomic variables, such as GDP and unemployment that rise and fall irregularly over time, relative to trend. There is some tendency for cyclical movements of large countries to cause similar movements in other countries with whom they trade.
	Business Cycle Dating Committee	See National Bureau of Economic Research.
	Business process outsourcing	The outsourcing and/or offshoring of business processes, such as the back office functions such as accounting, human resource management, etc.
	Buy American Act	U.S. legislation requiring that government purchases give preference to domestic producers unless imports are at least a specified percentage cheaper. This is an example of a government procurement NTB that was partially given up under the Tokyo Round.
	Byrd Amendment	A US law enacted in 2000 requiring that revenues from anti-dumping duties and countervailing duties be given to the US domestic producers who had filed the cases.
	Cabotage	1. Navigation and trade by ship along a coast, especially between ports within a country. Restricted in the U.S. by the Jones Act to domestic shipping companies.
	Cabotage	2. Air transportation within a country. Often restricted to domestic carriers, in an example of barriers to trade in services.
	CACM	Central American Common Market.
	CAFTA	U.S.-Central American Free Trade Agreement.
	Cairnes-Haberler Model	A trade model in which all factors of production are assumed immobile between industries. See specific factors model.
	Cairns Group	A group of agricultural exporting countries, currently (2007) numbering 19, that was formed in 1986 to act as a counterweight especially to the EU in international negotiations on agriculture. Named after the city in Australia where the group first met, in August 1986.
	Calibration	In economic models, particularly computable general equilibrium models, this refers to the assignment of values to parameters so as to align the model with real-world data.
	CAN	Comunidad Andina (Spanish for Andean Community)
	Canada-US Auto Pact	The "Canada-United States Automotive Products Agreement of 1965" which reduced trade barriers on specified trade between Canada and the United States in automobiles and original-equipment auto parts.
	Canada-US Free Trade Agreement	A free trade agreement between Canada and the United States signed in 1989 and superseded by the NAFTA in 1994.
	Cancún Ministerial	The 5th ministerial meeting of the WTO held in Canc?n, Mexico, September 10-14, 2003 as part of the Doha Round of multilateral trade negotiations. The meeting failed to reach agreement on a framework text for the round because of disagreements between the US/EU and the G-20, mostly over agricultural subsidies.
	Canonical model of currency crises	This term has been used to refer to the model that Krugman (1979) presented of a currency crisis that results when domestic policy is pursued in a manner inconsistent with a pegged exchange rate.
	CAP	Common Agricultural Policy
	Capacity building	The term used repeatedly in the Doha Declaration referring to the assistance to be provided to developing countries in establishing and administering their trade policies, conducting analysis, and identifying their interests in trade negotiations.
	Capital	1. The plant and equipment used in production.
	Capital	2. One of the main primary factors, the availability of which contributes to the productivity of labor, comparative advantage, and the pattern of international trade.
	Capital	3. A stock of financial assets.
	Capital abundant	A country is capital abundant if its endowment of capital is large compared to other countries. Relative capital abundance can be defined by either the quantity definition or the price definition.
	Capital account	1. (Current definition) Since sometime in the 1990s, "capital account" refers to a minor component of international transactions, involving unilateral transfers of ownership of property. The common definition, below, describes what is now called the financial account.
	Capital account	2. (Common definition) A country's international transactions arising from changes in holdings of real and financial capital assets (but not income on them, which is in the current account). Includes FDI, plus changes in private and official holdings of stocks, bonds, loans, bank accounts, and currencies.
	Capital account	3. (Bretton-Woods definition) Same as common definition except excluding official reserve transactions. This definition was used under the Bretton Woods System of pegged exchange rates, but is less meaningful under floating exchange rates.
	Capital account balance	Balance on capital account
	Capital account deficit	Debits minus credits on capital account. See deficit.
	Capital account surplus	Credits minus debits on capital account. Same as balance on capital account. See surplus.
	Capital accumulation	Addition to the stock of capital.
	Capital adequacy ratio	The ratio of a bank's capital to its risk-weighted credit exposure. International standards recommend a minimum for this ratio, intended to permit banks to absorb losses without becoming insolvent, in order to protect depositors.
	Capital augmenting	Said of a technological change or technological difference if one production function produces the same as if it were the other, but with a larger quantity of capital. Same as factor augmenting with capital the augmented factor. Also called Solow neutral.
	Capital consumption allowance	The name used in the National Income and Product Accounts for depreciation of capital.
	Capital control	Any policy intended to restrict the free movement of capital, especially financial capital, into or out of a country.
	Capital depreciation	See depreciation.
	Capital duty	A tax on the value of a newly formed company, or one that has newly been transfered to a different taxing jurisdiction.
	Capital flight	Large financial capital outflows from a country prompted by fear of default or, especially, by fear of devaluation.
	Capital flow	International capital movement.
	Capital formation	Capital accumulation
	Capital gain	The increase in value that the owner of an asset experiences when the price of the asset rises, including when the currency in which the asset is denominated appreciates. Contrasts with capital loss.
	Capital good	A good, such as a machine, that, once in place, becomes part of the capital stock.
	Capital inflow	A net flow of capital, real and/or financial, into a country, in the form of increased purchases of domestic assets by foreigners and/or reduced holdings of foreign assets by domestic residents. Recorded as positive, or a credit, in the balance on capital account.
	Capital infusion	An increase in financial capital provided from outside a bank, corporation, or other entity.
	Capital intensity	A measure of the relative use of capital, compared to other factors such as labor, in a production process. Often measured by the ratio of capital to labor, or by the share of capital in factor payments.
	Capital intensive	Describing an industry or sector of the economy that relies relatively heavily on inputs of capital, usually relative to labor, compared to other industries or sectors. See factor intensity.
	Capital-labor ratio	The ratio of the quantity of capital (usually only physical) to the quantity of labor, usually as employed in a particular industry, but sometimes referring to the entire factor endowment of a country.
	Capital loss	The decrease in value that the owner of an asset experiences when the price of the asset falls, including when the currency in which the asset is denominated depreciates. Contrasts with capital gain.
	Capital market	A broad term, encompassing all the many mechanisms by which savings can be conveyed to those who wish to use it for investment. Most obviously, it includes the markets for stocks and bonds.
	Capital market imperfection	Anything that interferes with the ability of economic agents to borrow and lend as much as they wish at a fixed rate of interest that truly reflects probability of repayment. A common source of imperfection is asymmetric information.
	Capital mobility	The ability of capital to move internationally. The degree of capital mobility depends on government policies restricting or taxing capital inflows and/or outflows, plus the risk that investors in one country associate with assets in another.
	Capital movement	Capital inflow and/or outflow.
	Capital outflow	A net flow of capital, real and/or financial, out of a country, in the form of reduced holdings of domestic assets by foreigners and/or increased holdings of foreign assets by domestic residents. Recorded as negative, or a debit, in the balance on capital account.
	Capital output ratio	The ratio of the quantity of capital to the quantity of output, usually in the one-sector economy of a simple growth model.
	Capital-saving	A technological change or technological difference that is biased in favor of using less capital, compared to some definition of neutrality.
	Capital scarce	A country is capital scarce if its endowment of capital is small compared to other countries. Relative capital scarcity can be defined by either the quantity definition or the price definition.
	Capital stock	The total amount of physical capital that has been accumulated, usually in a country.
	Capital-using	A technological change or technological difference that is biased in favor of using more capital, compared to some definition of neutrality.
	Capitalism	An economic system in which capital is mostly owned by private individuals and corporations. Contrasts with communism.
	Capitalist	1. An owner (or sometimes only a manager) of capital.
	Capitalist	2. Associated or identified with capitalism.
	Caribbean Basin Initiative	A preferential trading arrangement originally enacted in 1983 by the United States, providing duty-free access to a group of Caribbean countries for selected products. It was renewed and extended in 2000.
	Caribbean Community	The Caribbean Community and Common Market was formed among four Caribbean countries in 1973 and had 15 members as of 2007. Its purpose is the promotion of economic integration among the member countries and coordination of foreign policies.
	Caribbean Development Bank	A financial institution whose members are primarily the countries of the Caribbean region and whose purpose is to foster economic development in the region.
	CARICOM	Caribbean Community and Common Market. Includes 15 members and 5 associate members.
	CARICOM Single Market and Economy	The economic objectives of the CARICOM group, which include becoming a common market.
	Carriage of Goods by Sea Act	U.S. legislation governing ocean transport of cargo.
	Carrier	A firm that provides transportation of persons or goods.
	Carry trade	The practice of borrowing in the currency of a country where interest rates are low and lending the proceeds in the currency of a country where interest rates are higher, in hopes of profiting from the difference. Success depends on exchange rates remaining relatively constant. Also known as uncovered interest arbitrage.
	Cartagena Agreement	The 1969 agreement, also known as the Andean Pact, that led ultimately to the Andean Community.
	Cartel	A group of firms or countries that seeks to raise the price of a good by restricting its supply. The term is usually used for international groups, especially involving state-owned firms and/or governments.
	Cascading tariffs	Same as tariff escalation.
	CBI	Caribbean Basin Initiative
	CCCN	Customs Cooperation Council Nomenclature
	CDB	Caribbean Development Bank
	Cecchini Report	A 1988 report by a group of experts, chaired by Paolo Cecchini, examining the benefits and costs of creating a single market in Europe, in accordance with provisions of the Treaty of Rome.
	CEEC	Central and Eastern European countries.
	CEFTA	Central European Free Trade Agreement.
	Ceiling	See price ceiling.
	Central American Common Market	A group of Central American countries -- El Salvador, Guatemala, Honduras, and Nicaragua -- that formed a common market in 1960, with Costa Rica added in 1962. It largely disintegrated in the 1970s and 80s due to military conflicts, but reformed as the Central American Free Trade Zone (but without Costa Rica) starting in 1993.
	Central and Eastern European countries	Refers, informally, usually to the former Communist countries of Europe.
	Central bank	The institution in a country (or a currency area) that is normally (but see currency board) responsible for managing the supply of the country's money and the value of its currency on the foreign exchange market.
	Central bank intervention	See exchange market intervention.
	Central bank reserves	International reserves.
	Central European Free Trade Agreement	A free trade agreement initiated 1993 among the Czech Republic, Hungary, Poland, Slovakia, and Slovenia, now also including Bulgaria and Romania. Its purpose was in part to reverse the bias against trade among these neighboring countries that had developed during the process of transition.
	Central Intelligence Agency	Intelligence gathering (and espionage) agency of the United States government, publisher of the World Fact Book.
	Central parity	Par value.
	Central planning	The guidance of the economy by direct government control over a large portion of economic activity, as contrasted with allowing markets to serve this purpose.
	CEPAL	Comision Economica para America Latina y el Caribe (Spanish for Economic Commission for Latin America and the Caribbean.
	CER	Australia-New Zealand Closer Economic Relations Trade Agreement.
	Certainty	Precise knowledge of an economic variable, as opposed to belief that it could take on multiple values. Contrasts with uncertainty. One aspect of complete information.
	CES Function	A function with constant elasticity of substitution. CES is popular for both production and utility functions. Used extensively in New Trade Theory as the Dixit-Stiglitz utility function for differentiated products under monopolistic competition. With arguments X = (X1,...,Xn), the function is F(X) = A[SiaiXir]1/r, where ai, A are positive constants and s = 1/(1-r) is the elasticity of substitution. Due to Arrow et al. (1961).
	CET function	Constant elasticity of transformation function.
	Ceteris paribus	Latin phrase meaning, approximately, "holding other things constant." Used as shorthand for indicating the effect of one economic variable on another, holding constant all other variables that may affect the second variable. Contrasts with mutatis mutandis.
	CGE	Computable general equilibrium.
	Chaebol	A form of large business in South Korea, a conglomerate consisting of many companies centered around a parent company. They are family controlled and have strong ties to government. They are similar to the keiretsu of Japan, except that the chaebol do not own banks.
	Chain of comparative advantage	A ranking of goods or countries in order of comparative advantage. With two countries and many goods, goods can be ranked by comparative advantage (e.g., by relative unit labor requirements in the Ricardian model). A country's exports will then lie nearer one end of the chain than its imports. With two goods, many countries can be ordered similarly.
	Change in consumer surplus	The change in consumer surplus due to a change in market conditions, usually a price change. For a price change, it is measured by the area to the left of the demand curve between the two prices, indicating a gain if price falls and a loss if it rises.
	Change in producer surplus	The change in producer surplus due to a change in market conditions, usually a price change. For a price change, it is measured by the area to the left of the (upward sloping part of the) supply curve between the two prices, indicating a gain if price rises and a loss if it falls.
	Chapeau	In the context of GATT articles, this means an introductory paragraph.
	Chapter 11	1. In NAFTA, this portion deals with foreign direct investment. Most controversially, it includes a provision for a firm from one member country that has invested in another to bring action against a unit of government in that country if it has acted to reduce the value of its investment.
	Chapter 12	2. A portion of U.S. bankruptcy law under which a firm can file for protection while it reorganizes.
	CHF	Acronym for the currency of Switzerland, the Swiss franc, standing for Confœderatio Helvetica Franc.
	Chiang Mai Initiative	An agreement in 2000 among the "ASEAN+3" countries (ASEAN plus China, Japan, and S. Korea) to cooperate in four main areas: monitoring capital flows, regional surveillance, swap networks, and training personnel.
	Chicken War	A trade dispute between the U.S. and the EEC that began in 1962 when the EEC extended the variable levy of the CAP to poultry, tripling German tariffs on U.S. chickens. A GATT panel quantified the damage and led to U.S. retaliatory tariffs on cognac, trucks, and other goods. The U.S. 25% tariff on trucks today is a remnant of the chicken war.
	Child labor	1. Employment of children under a specified minimum age.
	Child labor	2. Work that harmful to a child's physical or mental health, development, or education, and that is therefore targeted for elimination by labor standards.
	Child Labor Deterrence Act	A bill introduced into the US Congress by Tom Harkin, but never passed, that would have prohibited imports of products produced by child labor.
	Chinese Economic Area	Unofficial name for the area comprising Hong Kong, Taiwan, and either China as a whole or just its Special Economic Zones.
	Chlorinated chicken dispute	The issue of whether Europe should be able to restrict, or require labeling of, US exports of chicken that has been bathed in a chlorine solution to kill bacteria.
	CIA	1. Cash in advance
	CIA	2. Central Intelligence Agency
	CIF	The price of a traded good including transport cost. It stands for "cost, insurance, and freight," but is used only as these initials (usually lower case: c.i.f.). It means that a price includes the various costs, such as transportation and insurance, needed to get a good from one country to another. Contrasts with FOB.
	CIS	Commonwealth of Independent States
	CITES	Convention on International Trade in Endangered Species of Wild Fauna and Flora, an agreement among originally 80 governments effective in 1975 to prevent trade in wild animals and plants from threatening their survival. It works by requiring licensing of trade in covered species.
	Civil society	The name used to encompass a wide and self-selected variety of interest groups, worldwide. It does not include for-profit businesses, government, and government organizations, whereas it does include most NGOs.
	Civil society organization	Non-governmental organization
	Classification system	A system for organizing, recording, and reporting data of a particular kind, such as international trade, industrial output, etc. A typical system divides its topic into categories to which it assigns numbers. These may in turn be subdivided, with each additional subdivision captured by an additional digit in the identifier, with the result that the more digits are used, the finer is the classification.
	Classical	Referring to the writings, models, and economic assumptions of the first century of economics, including Adam Smith, David Ricardo, and John Stuart Mill.
	Clear	A market is said to clear if supply is equal to demand. Market clearing can be brought about by adjustment of the price (or the exchange rate, in the case of the exchange market), or by some form of government (or central bank) intervention in or regulation of the market.
	Clearing system	An arrangement among financial institutions for carrying out the transactions among them, including canceling out offsetting credits and debits on the same account.
	Closed currency position	A commitment to take or make delivery of a currency in the future that is covered by a contract in the forward market; opposite of an open position.
	Closed economy	An economy that does not permit economic transactions with the outside world; a country in autarky.
	Closer Economic Relations	See Australia-New Zealand Closer Economic Relations Trade Agreement.
	Closure	See macroeconomic closure.
	CMEA	Council for Mutual Economic Assistance
	Coase Theorem	The proposition that the allocation of property rights does not matter for economic efficiency, so long as they are well defined and a free market exists for the exchange of rights between those who have them and those who do not. Due to Coase (1960).
	Cobb-Douglas function	A popular functional form for production and utility functions. With arguments X = (X1,...,Xn), the function is F(X) = APiXiai, where Siai = 1 and A are positive constants. This function has elasticity of substitution between arguments equal to one. As a production or utility function, it has competitive expenditure shares equal to ai.
	Codex Alimentarius	This is the "food code," consisting of standards, codes of practice, guidelines, and recommendations for producing and processing food. It is administered by the Codex Alimentarius Commission.
	Coefficient	1. A number or symbol multiplied by a variable.
	Coefficient	2. In a regression analysis, the estimated numerical association between one variable and another, usually taken to represent the sign and size of the causal effect of one on the other.
	COGSA	Carriage of Goods by Sea Act.
	Collective action problem	The difficulty of getting a group to act when members benefit if others act, but incur a net cost if they act themselves.
	Collusion	Cooperation among firms to raise price and otherwise increase their profits.
	COMECON	Council for Mutual Economic Assistance
	COMESA	Common Market of Eastern and Southern Africa
	Command economy	An economy in which decisions about production and allocation are made by government dictate, rather than by decentralized responses to market forces.
	Commercial bank	An institution that accepts and manages deposits from households, firms and governments and uses a portion of those deposits to earn interest by making loans and holding securities.
	Commercial paper	Short-term, negotiable debt of a firm; thus a bond of short maturity issued by a company.
	Commercial policy	Government policies intended to influence international commerce, including international trade. Includes tariffs and NTBs, as well as policies regarding exports.
	Commodity	Could refer to any good, but in a trade context a commodity is usually a raw material or primary product that enters into international trade, such as metals (tin, manganese) or basic agricultural products (coffee, cocoa).
	Commodity agreement	See international commodity agreement.
	Commodity pattern of trade	The trade pattern of a country or the world, focusing on goods and services traded as opposed to the factor content of that trade.
	Commodity prices	Usually means the prices of raw materials and primary products.
	Common Agricultural Policy	The regulations of the European Union that seek to merge their individual agricultural programs, primarily by stabilizing and elevating the prices of agricultural commodities. The principle tools of the CAP are variable levies and export subsidies.
	Common currency	A currency that is shared by more than one country. Thus the currency of a currency area.
	Common external tariff	The single tariff rate agreed to by all members of a customs union on imports of a product from outside the union.
	Common market	A group of countries that eliminate all barriers to movement of both goods and factors among themselves, and that also, on each product, agree to levy the same tariff on imports from outside the group. Equivalent to a customs union plus free mobility of factors.
	Common Market of Eastern and Southern Africa	A trade agreement involving 21 nations of Eastern and Southern Africa. It went into effect in 1994, replacing a Preferential Trade Area that had begun in 1982, with the aim of forming a free trade area by 2000 and achieving other trade liberalization and transport facilitation over a period of 16 years.
	Common tangent	A straight line that is tangent to two or more curves. Used in the Lerner diagram.
	Commonwealth of Independent States	An organization formed in 1991 of the nations that had been part of the USSR.
	Communism	An economic system in which capital is owned by government. Contrasts with capitalism.
	Community indifference curve	One of a family of indifference curves intended to represent the preferences, and sometimes the well-being, of a country as a whole. This is a handy tool for deriving quantities of trade in a two-good model, although its legitimacy depends on the existence of community preferences, which in turn requires very restrictive assumptions. See Leontief (1933).
	Community preferences	A set of consumer preferences, analogous to those of an individual as might be represented by a utility function, but representing the preferences of a group of consumers. The existence of well-behaved community preferences requires restrictive assumptions about individual preferences and/or incomes.
	Company	This word has many meanings, but in economics it is usually a synonym for firm.
	Comparative advantage	The ability to produce a good at lower cost, relative to other goods, compared to another country. In a Ricardian model, comparison is of unit labor requirements; more generally it is of relative autarky prices. With perfect competition and undistorted markets, countries tend to export goods in which they have comparative advantage. See also absolute advantage. Due to Ricardo (1815).
	Comparative static	Refers to a comparison of two equilibria from a static model, usually differing by the effects of a single small change in an exogenous variable.
	Compensated demand curve	A demand curve constructed under the assumption that demander's income is not held constant, but rather is varied to hold level of utility at a constant level. The change in consumer surplus calculated from particular compensated demand curves measures compensating variation and equivalent variation.
	Compensating variation	An amount of money that just compensates a person, group, or whole economy, for the welfare effects of a change in the economy, thus providing a monetary measure of that change in welfare. Same as willingness to pay. Contrasts with equivalent variation.
	Compensation	1. The GATT principle that members who violate GATT rules must compensate other countries by lowering tariffs or making other concessions, or be subject to retaliation.
	Compensation	2. The actual or potential payment by the winners from a change in trade or other policy to the losers, intended to undo the harm to the latter. Actual compensation is rare, but the potential for compensation is used as the basis for most evaluations of the gains from trade.
	Compensation principle	As a basis for welfare comparisons, the idea that if a policy change (such as a tariff reduction) could be Pareto improving if it were accompanied by appropriate lump-sum transfers from winners to losers, then it is viewed as beneficial even when those transfers do not occur.
	Compensation trade	Countertrade, including especially payment for foreign direct investment out of the proceeds from that investment.
	Competition	The interactions between two or more sellers or buyers in a single market, each attempting to get or pay the most favorable price. Economists usually interpret and model these interactions as among individual economic agents -- firms or consumers. Popular terminology extends also to competition among nations, especially competing exporters.
	Competition policy	Policies intended to prevent collusion among firms and to prevent individual firms from having excessive market power. Major forms include oversight of mergers and prevention of price fixing and market sharing. Called "anti-trust policy" in the U.S. One of the Singapore Issues.
	Competitive	1. Applied to a market or industry, this usually means perfectly competitive. Contrasts with imperfectly competitive.
	Competitive	2. Applied to a firm or the products of a country, this usually means having low price, high quality, or other characteristics that make it attractive to purchasers compared to products from other firms or countries. See competitiveness.
	Competitive advantage	Competitiveness. Contrasts with comparative advantage.
	Competitive equilibrium	See equilibrium.
	Competitive factor market	A market for a factor in which both suppliers and demanders are perfectly competitive, taking the factor price as given.
	Competitiveness	Usually refers to characteristics that permit a firm to compete effectively with other firms due to low cost or superior technology, perhaps internationally. Thus the condition of being competitive (definition #2). When applied to nations, instead of firms, the word has a mercantilist connotation.
	Complete information	The assumption that economic agents (buyers and sellers, consumers and firms) know everything that they need to know in order to make optimal decisions. Types of incomplete information are uncertainty and asymmetric information.
	Complete specialization	1. Non-production of some of the goods that a country consumes, as in definition 2 of specialization.
	Complete specialization	2. Production only of goods that are exported or nontraded, but none that compete with imports.
	Complete specialization	3. Production of only one good.
	Complete specialization	4. Being the only country in the world to produce a good.
	Composite currency	A currency defined as a specified combination of two or more currencies, normally existing only as a unit of account rather than as a physical currency. Examples include the SDR and the ECU.
	Composite good	A fictional good that is used in economic analysis to stand in for a large number of goods, usually all other goods than the one that is the focus of attention.
	Compound tariff	A tariff that combines both a specific and an ad valorem component.
	Compulsory licensing	A legal requirement for the owner of a patent to let other firms produce its product, under specified terms. Countries sometimes require foreign patent holders to license domestic firms so as to improve access to the patented product at lower cost. This is permitted by the TRIPs Agreement for certain purposes, such as protecting public health.
	Computable general equilibrium	Refers to economic models of microeconomic behavior in multiple markets of one or more economies, solved computationally for equilibrium values or changes due to specified policies. The equations are anchored with data from the countries being modeled, while behavioral parameters are either assumed or adapted from estimates elsewhere.
	Comvariance	An analogue to covariance for three variables. For three variables x, y, and z with values xi, yi, zi, i=1,…,n, the comvariance is com(x,y,z) = Si=1…n(xi-m(x))(yi-m(y))(zi-m(z)), where m(·) is the mean of the values in its argument. Due to Deardorff (1982).
	Concave	Said of a curve that bulges away from some reference point, usually the horizontal axis or the origin of a diagram. More formally, a curve is concave from below (or concave to something below it) if all straight lines connecting points on it lie on or below it. Contrasts with convex.
	Concentration	See industrial concentration.
	Concentration ratio	A common measure of industry concentration, defined as the percent of sales in the industry accounted for by the largest n firms. n is some small number such as 4 or 6, and the result is called the "n-firm concentration ratio."
	Concertina tariff reduction	The reduction of a country's highest tariff to the level of the next highest, followed by the reduction of both to the level of the next highest after that, and so forth. Also called the concertina rule. This is known to raise welfare if all goods are net substitutes.
	Concession	The term used in GATT negotiations for a country's agreement to bind a tariff or otherwise reduce import restrictions, usually in return for comparable "concessions" by other countries. Use of this term, with its connotation of loss, for what economic theory suggests is often a source of gain, is part of what has been called GATT-Speak.
	Concessional financing	Loans made by a government at an interest rate below the market rate as an indirect method of providing a subsidy.
	Conditionality	The requirements imposed by the IMF and World Bank on borrowing countries to qualify for a loan, typically including a long list of budgetary and policy changes comprising a structural adjustment program.
	Cone of diversification	See diversification cone.
	Congestion	The costs and inefficiencies that result when a space becomes crowded. For example, costs of international trade may rise due to congestion of ports, if these facilities are not expanded along with trade.
	Conservative Social Welfare Function	A social welfare function that takes special account of the costs to individuals of losing relative to the status quo, and that therefore seeks to avoid large losses to significant groups within the population. Due to Corden (1974).
	Consignment	1. Something that is put into the care of another, as when a batch of traded goods is consigned to a shipper for transport to another location.
	Consignment	2.A method of marketing in which the seller entrusts a product to an agent, who then attempts to sell it on the seller's behalf, or "on consignment."
	Console	A bond with no maturity date, which instead pays a fixed amount per year forever. Its simplicity makes it a convenient example in textbooks, where it appears much more frequently than in the real world.
	Constant dollars	Dollars of constant purchasing power. That is, corrected for inflation. More precisely includes reference to a base year for comparison, e.g. "in constant 1992 dollars." Same as constant prices.
	Constant elasticity of substitution function	See CES function
	Constant elasticity of transformation function	A function representing an economy's transformation curve along which the elasticity of transformation is constant.
	Constant market share analysis	A technique for decomposing the change in a country's trade into components that correspond to holding its market shares constant in various markets. Introduced to international trade by Tyszynski (1951), it is an application of shift and share analysis of Creamer (1943).
	Constant prices	See constant dollars.
	Constant returns to scale	A property of a production function such that scaling all inputs by any positive constant also scales output by the same constant. Such a function is also called homogeneous of degree one or linearly homogeneous. CRTS is a critical assumption of the H-O Model of international trade. Contrasts with increasing returns and decreasing returns.
	Constraint set	The set of options among which a decision-maker is able to choose, given its resources and the market conditions that it faces.
	Constrict	While this word generally means to make something narrower, in economics it is commonly used for making something, especially the money supply, smaller (or perhaps to allow it to grow more slowly).
	Consultative Group to Assist the Poor	A consortium of public and private funding organizations working to expand access to financial services in poor countries.
	Consumer movement	One of four modes of supply of traded services, this one entails the buyer moving (temporarily) to the foreign location of the seller, as in the case of tourism.
	Consumer price index	A price index for the goods purchased by consumers in an economy, usually based on only a small sample of what they consume. Commonly used to measure inflation. Contrasts with the implicit price deflator.
	Consumer support estimate	Introduced by the OECD to quantify agricultural policies, this measures transfers to or from consumers that are implicit in these policies. Since industrialized-country agricultural producers are routinely supported by raising prices, CSE estimates are usually negative. See also PSE.
	Consumer surplus	The difference between the maximum that consumers would be willing to pay for a good and what they actually do pay. For each unit of the good, this is the vertical distance between the demand curve and price. For all units purchased at some price, it is the area below the demand curve and above the price. Normally useful only as the change in consumer surplus.
	Consumption externality	An externality arising from consumption.
	Consumption function	The function relating aggregate consumption to aggregate income and sometimes other variables such as wealth.
	Consumption possibility frontier	A graph of the maximum quantities of goods (usually two) that an economy can consume in a specified situation, such as autarky and free trade. Used to illustrate the potential benefits from trade by showing that it can expand consumption possibilities.
	Contagion	The phenomenon of a financial crisis in one country spilling over to another, which then suffers many of the same problems.
	Content protection	See domestic content protection.
	Content requirement	See domestic content requirement.
	Contestable market	A market that, even though it has only a single or a small number of sellers, could readily admit more, so that the pricing behavior of current sellers is constrained by the potential for entry. Term introduced by Baumol et al. (1982)
	Contingent protection	Administered protection.
	Continuous time	The use of a continuous variable to represent time, as in an economic model.
	Continuum model	A model in which some entities that are normally discrete and exist in finite numbers are modeled instead by a continuous variable. This can sometimes simplify the treatment of large numbers of entities. In trade theory, the most notable example is the continuum-of-goods model.
	Continuum-of-goods model	A class of trade models in which goods are indexed by a continuous variable, approximating the case of very large numbers of goods. The classic, original examples are Dornbusch, Fischer, and Samuelson (1977, 1980).
	Contract curve	1. In an Edgeworth Box for consumption, the allocations of 2 goods to 2 consumers that are Pareto efficient. Starting with an allocation that may not be on the contract curve, it shows the ways that the consumers might contract to exchange the goods with each other.
	Contract curve	2. In an Edgeworth Box for production, this name is sometimes also used for the efficiency locus.
	Contracting party	A country that has signed the GATT. The term Contracting Parties with both words capitalized means all Contracting Parties acting jointly.
	Contraction	Economic contraction
	Contractionary	Tending to cause aggregate output (GDP) and/or the price level to fall. Term is typically applied to monetary policy (a decrease in the money supply or an increase in interest rates) and to fiscal policy (a decrease in government spending or a tax increase), but may also apply to other macroeconomic shocks. Contrasts with expansionary.
	Convention	A statement of principle as to acceptable behavior. For example, members of the International Labor Organization have agreed to a long list of conventions regarding the acceptable treatment of workers.
	Convergence	The process of becoming quantitatively more alike. In an international context, it often refers to countries becoming more alike in terms of their factor prices or in terms of their per capita incomes, perhaps as a result of trade or other forms of economic integration.
	Convertible currency	A currency that can legally be exchanged for another or for gold. In times of crisis, governments sometimes restrict such exchange, giving rise to black market exchange rates.
	Convex	1. Said of a curve that bulges toward some reference point, usually the horizontal axis or the origin of a diagram. More formally, a curve is convex from below (or convex to something below it) if all straight lines connecting points on it lie on or above it. Contrasts with concave.
	Convex	2. Said of a set that contains all straight line segments joining points within it.
	Convex combination	The convex combination of two points (or vectors), x and y, is their weighted average, with nonnegative weights on each: lx + (1-l)y, where 0?l?1.
	Convex hull	The boundary of the set of points that are either members of, or convex combinations of, points from two or more other sets. The convex hull of two or more isoquants consists of the innermost of the isoquants themselves plus the points between them on their common tangents.
	Convexity	This is just the state of being convex. More generally in economics it refers to the sets (production possibilities, preferences, and constraints which, if they are convex, may yield well behaved economic equilibria. In contrast, models that are nonconvex tend to have multiple equilibria and display discontinuous behavior (jumps).
	Coordination	Cooperation in setting economic policy, especially across countries, so that policies of different governments reinforce each other rather than canceling each other out.
	Copyright	The legal right to the proceeds from and control over the use of a created product, such a written work, audio, video, film, or software. This right generally extends over the life of the author plus fifty years. Copyright is one form of intellectual property that is subject of the TRIPS agreement.
	Core	The set of allocations that cannot be improved upon by a subset of consumers trading among themselves. In an pure exchange economy, the core is the contract curves.
	Core inflation	The rate of inflation excluding certain sectors whose prices are most volatile, specifically food and energy.
	Core labor standard	Several labor standards that are considered the most basic and fundamental. The ILO identifies eight conventions as "fundamental," covering the topics: freedom of association and collective bargaining, forced labor, child labor, and discrimination.
	Core propositions	The core propositions of the HO Model are the factor price equalization theorem, the Heckscher-Ohlin Theorem, the Stolper-Samuelson Theorem, and the Rybczynski Theorem, according to Ethier (1974).
	Corn Laws	British regulations on the import and export of grain, mainly wheat, intended to control its price. The laws were repealed in 1846, signaling a shift toward free trade.
	Corporate income tax	A tax on the profits of corporations. Differences in corporate tax rates across countries can be a cause of foreign direct investment as well as transfer pricing.
	Corporate tax	Corporate income tax.
	Correlation	A measure of the extent to which two economic or statistical variables move together, normalized so that its values range from -1 to +1. It is defined as the covariance of the two variables divided by the square root of the product of their variances. The correlation is used in trade theory to express weak relationships among economic variables.
	Correlation result	A theoretical property of models with arbitrary numbers of goods or other variables that takes the form of a correlation among variables rather than a strict prediction for each one. Thus represents a weaker average relationship among the variables. Used for comparative advantage and other properties of trade models in higher dimensions.
	Corruption	Dishonest or partial behavior on the part of a government official or employee, such as a customs or procurement officer. Also actions by others intended to induce such behavior, such as bribery or blackmail.
	Cost advantage	Possession of a lower cost of production or operation than a competing firm or country. In the case of countries, this could refer to an absolute advantage, although it is more likeliy a comparative advantage.
	Cost-benefit analysis	The use of economic analysis to quantify the gains and losses from a policy or program as well as their distribution across different groups in a society.
	Cost function	A function relating the minimized total cost in a firm or industry to output and factor prices.
	Cost, insurance, freight	See CIF.
	Cost of living	The cost of a representative bundle of goods and services in consumption, usually as measured by the consumer price index.
	Cotonou Agreement	A partnership agreement between the EU and the ACP Countries signed in June 2000 in Cotonou, Benin, replacing the Lomé Convention. Its main objective is poverty reduction, "to be achieved through political dialogue, development aid and closer economic and trade cooperation."
	Council for Mutual Economic Assistance	An international organization formed in 1956 among the Soviet Union and other Communist countries to coordinate economic development and trade. It was disbanded in 1991. Also known as COMECON.
	Countertrade	Trade in which part or all of payment is made in goods or services. See barter.
	Countervailing duty	A tariff levied against imports that are subsidized by the exporting country's government, designed to offset (countervail) the effect of the subsidy.
	Country of origin	The country in which a good was produced, or sometimes, in the case of a traded service, the home country of the service provider.
	Country risk	The risk associated with operating in, trading with, or especially holding the assets issued by, a particular country. In the case of assets, country risk helps to explain why borrowers in some country must pay higher interest rates than borrowers from other countries, thus paying a country risk premium.
	Country size	Any of many measures of the size of a country. For most economic comparisons, however, country size refers to GDP.
	Coupon	The interest payment on a bond, so-named because bonds originally were pieces of paper with small sections, called coupons, that were cut off and exchanged for the interest payments.
	Cournot competition	The assumption, often assumed to be made by firms in an oligopoly, that other firms hold their outputs constant as they themselves change behavior. Contrasts with Bertrand competition. Both are used in models of international oligopoly, but Cournot competition is used more often.
	Cournot's law	That the sum of the balances of payments or of trade across all countries must be zero. Term seems to have been coined by, and perhaps only used by, Mundell (1960, p. 102), who credited it to Cournot (1897).
	Court of International Trade	See U.S. Court of International Trade.
	Covariance	A measure of the extent to which two economic or statistical variables move up and down together. For two variables x and y with values xi, yi, i=1,…,n, the covariance is cov(x,y) = Si=1…n(xi-m(x))(yi-m(y)), where m(·) is the mean of the values in its argument.
	Cover	To use the forward market to protect against exchange risk. Typically, an importer with a future commitment to pay in foreign currency would buy it forward, and exporter with a future receipt would sell it forward, and a purchaser of a foreign bond would sell forward the expected proceeds at maturity. See hedge.
	Coverage ratio	A measure of the presence of nontariff barriers, defined as the value of imports subject to one or a group of NTBs, divided by the total value of imports. Contrasts with frequency ratio and tariff equivalent.
	Covered interest arbitrage	A combination of transactions on two countries' securities and exchange markets designed to profit from failure of covered interest parity. A typical set of transactions would include selling bonds in one market, using the proceeds to buy spot foreign currency and foreign bonds, and selling forward the return at a future date. See also one-way arbitrage.
	Covered interest parity	Equality of returns on otherwise comparable financial assets denominated in two currencies, assuming that the forward market is used to cover against exchange risk. As an approximation, covered interest parity requires that i = i* + p where i is the domestic interest rate, i* is the foreign interest rate, and p is the forward premium.
	Covered interest rate	The covered interest rate, in a currency other than your own, is the nominal interest rate plus the forward premium on the currency; thus the percent you will earn holding the foreign asset while protecting against exchange-rate change by selling the foreign currency forward.
	CPI	Consumer price index.
	Crawling peg	An exchange rate that is pegged, but for which the par value is changed frequently by small amounts and in a preannounced fashion in response to signals from the exchange market.
	Creation	See trade creation.
	Credibility	The condition of being believed. Particularly relevant when a government or central bank tries to influence an economic variable, such as the exchange rate or the rate of inflation, since belief that it will fail induces market responses that hasten that failure.
	Credit	1. Recorded as positive (+) in the balance of payments, any transaction that gives rise to a payment into the country, such as an export, the sale of an asset (including official reserves), or borrowing from abroad. Opposite of debit.
	Credit	2. A loan. For example, a trade credit.
	Credit crunch	A shortage of available loans. In well-functioning markets, this would simply mean a rise in interest rates, but in practice it often means that some borrowers cannot get loans at all, a situation of credit rationing.
	Credit tranche	See tranche.
	Creditor nation	A country whose assets owned abroad are worth more than the assets within the country that are owned by foreigners. Contrasts with debtor nation.
	Creeping inflation	This term seems to be used both for a rate of inflation that is low but nonetheless high enough to cause problems, and for a rate of inflation that itself gradually moves higher over time.
	Crony capitalism	Used to describe a capitalist economy in which government or corporate officials and insiders provide lucrative opportunities for their friends and relatives. Term became popular during the Asian Crisis to describe some of the victim countries, but is now often used elsewhere as well.
	Cross-border supply	The provision of an internationally traded service across national borders without requiring physical movement of buyer or seller, as when the service can be provided by long-distance communication. One of four such modes of supply of traded services.
	Cross-country regression	The use of regression analysis on data from multiple countries, the purpose being to describe and perhaps explain their differences. For example, regressions of country GDP growth rates on their levels of trade or openness show a strong positive relationship between trade and growth, though without establishing causation.
	Cross elasticity	1. An elasticity that has been ignored by a student in a problem set.
	Cross elasticity	2. The elasticity of supply or demand for one good or service with respect to the price of another.
	Cross-hauling	The simultaneous shipment of the same product in opposite directions over the same route. The export of the same good by two countries to each other would be cross-hauling, if it occurs at the same time.
	Cross rate	1. The exchange rate between two currencies as implied by their values with respect to a third currency.
	Cross rate	2. Thus, since most currencies are commonly quoted in U.S. dollars, the exchange rate between any two currencies other than the dollar.
	Cross sectional variation	The differences in an economic variable that exist at a point in time comparing different economic units, such as consumers, firms, industries, or countries. Often used to seek evidence of causes of trade, growth, and other behaviors. Contrasts with time series variation.
	Cross subsidy	The use of profits from one activity to cover losses from another. Thus the use of high prices for some of a firm's products, for example, to permit it to price below cost for others. In international trade, this could be one explanation for dumping.
	CRS	Constant returns to scale = CRTS
	CRTS	Constant returns to scale
	Crude	Crude oil.
	CSE	Consumer support estimate
	CSME	CARICOM Single Market and Economy
	CSO	Civil society organization
	Cultural argument for protection	The view that imports undermine a country's culture and identity -- for example by changing consumption patterns to ones more similar to those abroad, or by reducing demands for domestically produced art and music -- and therefore that imports should be restricted.
	Cumulation	1. In an anti-dumping case against imports from more than one country, the summation of these imports for the purpose of determining injury. That is, the imports are deemed to have caused injury if all of them together could have done so, even if individually they would not.
	Cumulation	2. In overlapping free trade areas, a provision that allows inputs from one FTA to qualify as originating under another FTA's rules of origin.
	Currency	1. The money used by a country; e.g., the national currency of Japan is the yen.
	Currency	2. The physical embodiment of money, in the forms of paper bills or notes, and metal coins.
	Currency area	A group of countries that share a common currency. Originally defined by Mundell (1961) as a group that have fixed exchange rates among their national currencies.
	Currency basket	A group of two or more currencies that may be used as a unit of account, or to which another currency may be pegged.
	Currency bloc	1. A group of countries that share a common currency; a currency area.
	Currency bloc	2. A group of countries that peg their different national currencies to a single currency.
	Currency board	An extreme form of pegged exchange rate in which management of both the exchange rate and the money supply are taken away from the central bank and given to an agency with instructions to back every unit of circulating domestic currency with a specified amount of foreign currency. Operates similarly to the gold standard.
	Currency convertibility	See convertible currency.
	Currency crisis	The crisis that occurs when particpants in an exchange market come to perceive that an attempt to maintain a pegged exchange rate is about to fail, causing speculation against the peg that hastens the failure and forces a devaluation.
	Currency depreciation	See depreciation.
	Currency factor	The portion of a rate of return that is due to the currency in which the asset is denominated. The currency factor can be nonzero either because of currency risk or because of expected appreciation or depreciation.
	Currency in circulation	The amount of a country's currency that is in the hands of the public (households, firms, banks, etc), as opposed to sitting in the vaults of the central bank.
	Currency intervention	Exchange market intervention.
	Currency manipulation	The use of exchange market intervetion to keep the exchange rate above or below the equilibrium exchange rate. The term is most likely to be applied to a country that keeps its currency undervalued for the purpose of making its good more competitive.
	Currency misalignment	An exchange rate that is above or below the equilibrium exchange rate, perhaps but not necessarily due to currency manipulation.
	Currency mismatch	Having assets that are denominated in a different currency than liabilities, so that a change in exchange rate between those currencies can have a large positive or negative effect on net wealth.
	Currency realignment	A change in the par value of a pegged exchange rate.
	Currency reserves	This usually means international reserves.
	Currency risk	Uncertainty about the future value of a currency.
	Currency risk premium	The extent to which the interest rate in on bonds denominated in a currency exceeds what can be explained by default risk and expected changes in the exchange rate. What remains is presumed to be compensation for currency risk.
	Currency speculation	To buy or sell a currency in anticipation of its appreciation or depreciation respectively, the intent being to make a profit or avoid a loss. See speculation.
	Currency swap	See swap.
	Currency union	A group of countries that agree to peg their exchange rates and to coordinate their monetary policies so as to avoid the need for currency realignments.
	Current account	A country's international transactions arising from current flows, as opposed to changes in stocks which are part of the capital account. Includes trade in goods and services (including payments of interest and dividends on capital) plus inflows and outflows of transfers.
	Current account balance	Balance on current account
	Current account deficit	Debits minus credits on current account. See deficit.
	Current account surplus	Credits minus debits on current account. Same as balance on current account. See surplus.
	Current dollars	The phrase, "in current dollars" means "not adjusted for inflation."
	Current prices	Refers to prices in the present, rather than in some base year; e.g., "GDP at current prices" means GDP as measured, in contrast to real GDP, or "GDP at XXXX prices," where the latter is measured in the prices of year XXXX.
	CUSFTA	Canada-US Free Trade Agreement.
	CUSTA	Same as Canada-US Free Trade Agreement.
	Customs area	A geographic area that is responsible for levying its own customs duties at its border.
	Customs classification	1. The category defining the tariff to be applied to an imported good.
	Customs classification	2. The act of determining this category, which may be subject to various rules and/or to the discretion of the customs officer.
	Customs clearance	The processing of imported goods through a country's border procedures for inspection and taxation.
	Customs Cooperation Council Nomenclature	An international system of classification of goods for specifying tariffs, called the Brussels Tariff Nomenclature prior to 1976, and later superseded by the Harmonized System of Tariff Nomenclature
	Customs declaration	A written statement by an importer or traveler of the dutiable imports that they are bringing into a country.
	Customs duty	An import tariff.
	Customs officer	The government official who monitors goods moving across a national border and levies tariffs.
	Customs procedure	The practices used by customs officers to clear goods into a country and levy tariffs. Includes clearance procedures such as documentation and inspection, methods of determining a good's classification, and methods of assigning its value as the base for an ad valorem tariff. Any of these can impede trade and constitute a NTB.
	Customs Service	See U.S. Customs Service.
	Customs station	An office through which imported goods must pass in order to be monitored and taxed by customs officers.
	Customs union	A group of countries that adopt free trade (zero tariffs and no other restrictions on trade) on trade among themselves, and that also, on each product, agree to levy the same tariff on imports from outside the group. Equivalent to an FTA plus a common external tariff.
	Customs valuation	The method by which a customs officer determines the value of an imported good for the purpose of levying an ad valorem tariff. When this method is biased against importing, it becomes an NTB.
	CVD	Countervailing duty
	Cyclical unemployment	The portion of unemployment that is due to the business cycle and thus rises in recessions but then disappears eventually after the recession ends.
	DAC	Development Assistance Committee
	DAD	Delivery against documents. The requirement by a shipper that the recipient provide certain documents in order to be given the shipment.
	DDA	Doha Development Agenda
	DDN Index	Deardorff-Dixit-Norman Index
	DDP	Delivered duty paid
	DDU	Delivered duty unpaid
	De minimis	A legal term for an amount that is small enough to be ignored, too small to be taken seriously. Used to restrict legal provisions, including laws regarding international trade, to amounts of activity or trade that are not trivially small.
	Deadweight loss	The net loss in economic welfare that is caused by a tariff or other source of distortion, defined as the total losses to those who lose, minus the total gains to those who gain. Usually identified in a supply-and-demand diagram in terms of change in consumer and producer surplus together with government revenue. The net of these appears as one or two welfare triangles.
	Deardorff-Dixit-Norman Index	The value of net imports at autarky prices. Used by Deardorff (1980) and Dixit and Norman (1980) to indicate comparative advantage, it was named by Bernhofen and Brown (2005) and used to quantify comparative advantage and the gains from trade.
	Debase	To reduce the value of. Classically, a currency is debased if its value in terms of gold or other precious metal is reduced.
	Debase	1. A debt that is not backed by collateral, but only by the credit and good faith of the borrower.
	Debase	2. A certificate issued by customs authorities entitling an exporter of imported goods to be paid back duties that have been paid when they were imported. Such a refund is called a drawback.
	Debit	Recorded as negative (-) in the balance of payments, any transaction that gives rise to a payment out of the country, such as an import, the purchase of an asset (including official reserves), or lending to foreigners. Opposite of credit.
	Debt	The amount that is owed, as a result of previous borrowing. A country's debt may refer to the debt of its government or to that of the country as a whole.
	Debt burden	The debt of a country, when large enough that servicing it has become difficult.
	Debt cancellation	The most extreme form of debt relief, in which a country's debts are completely forgiven, so that no repayment of interest or principal is required.
	Debt crisis	1. Any situation in which a country, usually a developing country, finds itself unable to service its debts.
	Debt crisis	2. The Latin American Debt Crisis.
	Debt/equity swap	An exchange of debt for equity, in which a lender is given a share of ownership to replace a loan. Used as a method of resolving debt crises.
	Debt intolerance	In the context of the financial problems experienced by developing countries and emerging economies, this refers to their inability to manage levels of external debt that would be manageable for advanced countries. That is, their credit ratings decline more rapidly with debt than would those of an advanced country.
	Debt overhang	A situation in which the external debt of a country is larger than it will be able to repay. Often due to having borrowed in foreign currency and then had its own currency depreciate.
	Debt relief	Any arrangement intended to reduce the burden of debt on a country, usually including forgiveness of part or all of what is owed to creditors who may include private banks and other entities, government, or international financial institutions.
	Debt service	The payments made by a borrower on its debt, usually including both interest payments and partial repayment of principal.
	Debt sustainability	The ability of a debtor country to service its debt on a continuing basis and not go into default. After a debt crisis, sustainability may be restored through debt rescheduling.
	Debtor nation	A country whose assets owned abroad are worth less than the assets within the country that are owned by foreigners. Contrasts with creditor nation.
	Decile	One of ten segments of a distribution that has been divided into tenths. For example, the second-from-the-bottom decile of an income distribution is those whose income exceeds the incomes of from 10% to 20% of the population.
	Declaration	See customs declaration.
	Decouple	Refers to the provision of government support to an enterprise, usually a farm, in a manner that does not provide an incentive to increase production. Farm subsidies that are decoupled are included in the green box and are therefore permitted by the WTO.
	Decreasing cost	Average cost that declines as output increases, due to increasing returns to scale.
	Decreasing returns to scale	A property of a production function such that changing all inputs by the same proportion changes output less than in proportion. Example: a function homogeneous of degree less than one. Also called simply decreasing returns. Not to be confused with diminishing returns, which refers to increasing some inputs while holding other inputs fixed. Contrasts with increasing returns and constant returns.
	Deep integration	Refers to economic integration that goes well beyond removal of formal barriers to trade and includes various ways of reducing the international burden of differing national regulations, such as mutual recognition and harmonization. Contrasts with shallow integration.
	Default	Failure to repay a loan. International loans by governments and private agents lack mechanisms to deal with default, comparable to the legal mechanisms that exist within countries.
	Deficiency Payment	Payment to a producer of an amount equal to the difference between a guaranteed price and the market price, with the latter often determined on the world market. Thus a form of subsidy to production.
	Deficit	1. In the balance of payments, or in any category of international transactions within it, the deficit is the sum of debits minus the sum of credits, or the negative of the surplus.
	Deficit	2. In the government budget, the deficit is the excess of government expenditures over receipts from taxes.
	Deficit financing	1. The method used by a government to finance its budget deficit, that is, to cover the difference between its tax receipts and its expenditures. The main choices are to issue bonds or to print money.
	Deficit financing	2. The assumption that a change in government spending or taxes will be financed by a change in the government budget deficit, rather than by an accommodating additional change in spending or taxes to keep the budget balanced. Example: a "deficit-financed increase in government purchases."
	Deflation	A fall in the general level of prices. Unlikely unless the rate of inflation is already low, it may then be due either to a surge in productivity or, less favorably, to a recession.
	Deflator	The ratio of a nominal magnitude to its real counterpart. Usually refers, as with the GDP deflator, when the real magnitude has been constructed from underlying data and not by simply deflating the nominal magnitude by a corresponding price index, in which case the deflator itself may be used as though it were a price index.
	Deflection	See trade deflection.
	Degree of openness	See openness index.
	Degressive	Declining with income or over time. A degressive income tax takes a smaller fraction of higher incomes. Degressivity in trade policy might be a tariff the ad valoren size of which is scheduled to decline over time, or a quota that is scheduled to expand faster than demand for imports.
	De-industrialization	A decline over time in the share of manufacturing in an economy, usually accompanied by growth in the share of services. Typically accompanied by an increase in manufactured imports, it may raise concern that the country is losing valuable economic activity to others.
	Delivered duty paid	Specified in a trade contract, this means that the seller is obliged to pay any import duty and to do whatever else is necessary to bring the goods through customs. Contrasts with delivered duty unpaid.
	Delivered duty unpaid	Specified in a trade contract, this means that the seller is not obliged to pay any import duty or to do whatever else is necessary to bring the goods through customs. Contrasts with delivered duty paid.
	Delocalization	Another term for fragmentation. Used by Leamer (1996).
	Delocation	1. The movement of firms and their resulting employment from one country to another as a result of a change in trade policy.
	Delocation	2. More specifically, the effect of an import tariff or export subsidy in causing firm entry at home and exit abroad, so that domestic consumers gain from increased competition and/or reduced transport costs, while foreign consumers similarly lose. Effect identified by Venables (1985,1987).
	Demand	1. The act of offering to buy a product.
	Demand	2. The quantity offered to buy.
	Demand	3. The quantities offered to buy at various prices; the demand curve.
	Demand curve	The graph of quantity demanded as a function of price, normally downward sloping, straight or curved, and drawn with quantity on the horizontal axis and price on the vertical axis. Demand curves for imports and for foreign exchange usually have the same qualitative properties as demand curves for goods, but for somewhat different reasons.
	Demand deposit	A bank deposit that can be withdrawn "on demand." The term usually refers only to checking accounts, even though depositors in many other kinds of accounts may be able to write checks and thus regard their deposits as readily available.
	Demand elasticity	Normally the price elasticity of demand. References to other elasticities of demand, such as the income elasticity are normally explicit. See import demand elasticity.
	Demand function	The mathematical function explaining the quantity demanded in terms of its various determinants, including income and price; thus the algebraic representation of the demand curve.
	Demand price	The price at which a given quantity is demanded; thus the demand curve viewed from the perspective of price as a function of quantity.
	Demand schedule	A list of prices and corresponding quantities demanded, or the graph of that information. Thus a demand curve.
	Demand shock	A shock on the demand side of a market. Thus an unexpected shift, up or down, in the demand curve.
	Demographic transition	The change that typically takes place, as a country develops, in the birth and death rates of its population, both of which tend eventually to fall as per capita income rises.
	Demurrage	A cost associated with delay. It takes different forms in different contexts, such as when a ship is delayed in loading or unloading, or when currency or gold are held over time.
	Dependency Theory	The theory that less developed countries are poor because they allow themselves to be exploited by the developed countries through international trade and investment.
	Deposit	An amount of money placed with a bank for safekeeping, convenience, and/or to earn interest.
	Depreciate	See depreciation.
	Depreciation	1. A fall in the value of a country's currency on the exchange market, relative either to a particular other currency or to a weighted average of other currencies. The currency is said to depreciate. Opposite of "appreciation."
	Depreciation	2. The decline in value or usefulness of a piece of capital over time, and/or with use.
	Depression	A severe recession that lasts several years.
	Deregulation	The lessening or complete removal of government regulations on an industry, especially concerning the price that firms are allowed to charge and leaving price to be determined by market forces.
	Derivative	1. In mathematics, the ratio of the change in a variable to the infinitessimal change in another variable upon which it depends. Often used in economics to specify both assumptions and results of models.
	Derivative	2. In financial markets, a financial instrument whose value depends on some other financial variables. Old examples include forward and futures contracts.
	Derived demand	Demand that arises or is defined indirectly from some other demand or underlying behavior; e.g., demand for foreign currency is derived from demand for foreign goods, bonds, etc., while demand for import of a homogeneous good is derived from domestic demand and supply.
	Derogation	As used in the trade literature, this seems to mean a departure from the established rules, as when a country's policies are said to constitute a derogation from the GATT.
	Destabilizing speculation	Speculation that increases the movements of the price in the market where the speculation occurs. Movement may be defined by amplitude, frequency, or some other measure. See stabilizing speculation.
	Destination principle	The principle in international taxation that value added taxes be kept only by the country where the taxed product is being sold. Under the destination principle, value added taxes are collected on imports and rebated on exports. Contrasts with the origin principle.
	Deterministic	Not random. Contrasts with stochastic. Most models of international trade are deterministic.
	Devaluation	1. Depreciation.
	Devaluation	2. A fall in the value of a currency that has been pegged, either because of an announced reduction in the par value of the currency with the peg continuing, or because the pegged rate is abandoned and the floating rate declines.
	Devaluation	3. A fall in the value of a currency in terms of gold or silver, meaningful only under some form of gold standard or silver standard.
	Develop	To experience a sustained and substantial increase in per capita income; thus to undergo economic development.
	Developed country	A country whose per capita income is high by world standards.
	Developing country	A country whose per capita income is low by world standards. Same as less developed country. As usually used, it does not necessarily connote that the country's income is rising.
	Development	Economic development
	Development Assistance Committee	The group of member countries of the OECD that form the "principal body through which the OECD deals with issues related to co-operation with developing countries." It has 23 members (as of August 1, 2009), which are generally those OECD member countries with the highest per capita incomes, plus the Commission of the European Communities.
	Development bank	A multilateral institution that provides financing for development needs of a regional group of countries. Examples include the African, Asian, and Inter-American Development Banks.
	Development decade	The United Nations General Assembly had, as of 27 September 2001, designated as "development decades" 1960-70, 1971-80, 1981-90, and 1991-2000.
	Development finance	Provision of credit to a developing country to permit it to undertake development projects that it could not otherwise afford.
	Development finance institution	A governmental or inter-governmental body that provides development finance.
	Development project	A project intended to increase a developing country's ability to produce in the future. Such projects are most commonly additions to the country's capital stock, but they may involve improvements in infrastructure, educational facilities, discovery or development of natural resources, etc.
	Deviation	See standard deviation.
	DFI	Direct Foreign Investment
	DFS Model	One of the continuum-of-goods models of Dornbusch, Fischer, and Samuelson (1977, 1980).
	Diagonal	1. In a matrix, the elements on a straight line from the top left to the bottom right, or occasionally from the bottom left to the top right.
	Diagonal	2. In an Edgeworth box, the straight line from the bottom left corner to the top right. Along the diagonal, the ratios of allocations of the two agents (industries or consumers) are constant and equal.
	Diagonal	3. In an integrated world economy diagram, the straight line from the bottom left corner to the top right. Along the diagonal, the ratios of factor endowments of the two coutries are constant and equal.
	Differential treatment	See special and differential treatment.
	Differentiated product	1. A firm's product that is not identical to products of other firms in the same industry. Contrasts with homogeneous product.
	Differentiated product	2. Sometimes applied to products produced by a country, even though there are many firms within the country whose products are the same, if buyers distinguish products based on country of origin. This is called the Armington assumption.
	Dillon Round	The fifth round of multilateral trade negotiations that was held under GATT auspices, commencing 1960 and completed 1961. It was the first to be given a name, after C. Douglas Dillon, U.S. Undersecretary of State under Eisenhower and Treasury Secretary under Kennedy.
	Diminishing returns	The fall in the marginal product of a factor or factors that eventually occurs as input of that factor rises, holding the input of at least one other factor fixed, according to the Law of Diminishing Returns.
	Diminishing returns to scale	See decreasing returns to scale, which is the preferred term in order to distinguish it from diminishing returns to a single factor when at least one other is held fixed.
	Direct devaluation	Devaluation of the nominal exchange rate. Can be viewed as an alternative to devaluing the real exchange rate by using other policies that change prices or expenditure.
	Direct factor content	A measure of factor content that includes only the factors used in the last stage of production, ignoring factors used in producing intermediate inputs. Contrasts with direct-plus-indirect factor content.
	Direct foreign investment	Foreign direct investment
	Direction of trade	1. Refers to the particular countries and kinds of countries toward which a country's exports are sent, and from which its imports are brought, in contrast to the commodity composition of its exports and imports. Thus the pattern of its bilateral trade.
	Direction of trade	2. Direction of Trade Statistics
	Direction of Trade Statistics	Publication of the International Monetary Fund.
	Direct-plus-indirect factor content	A measure of factor content that includes factors used in producing intermediate inputs, factors used in producing intermediate inputs to the intermediate inputs, and so forth. That is, it includes all primary factors that contributed however indirectly to production of the good. Contrasts with direct factor content.
	Directly Unproductive Profit-Seeking Activities	Activities that have no direct productive purpose (neither increasing consumer utility nor contributing to production of a good or service that would increase utility) and are motivated by the desire to make profit, typically from market distortions created by government policies. Examples are rent seeking and revenue seeking. Term coined by Bhagwati (1982).
	Director General	Title given to the persons who head certain international organizations, including the WTO.
	Dirigiste	Centrally planned; that is, under the direction of a central authority, normally the government. Contrasts with decentralized, or a system in which economic decisions are determined by market forces in a market economy.
	Dirty float	Same as managed float.
	Disarticulation	The absence of linkage among sectors of an economy, so that growth in some does not spill over into improved productivity and well being in others.
	DISC	Domestic International Sales Corporation
	Discount	1. Any reduction in price or value, especially when below a stated or normal price.
	Discount	2. To buy or sell commercial paper at a price below face value to account for interest to accrue before maturity.
	Discount rate	1. The rate, per year, at which future values are diminished to make them comparable to values in the present. Can be either subjective (reflecting personal time preference) or objective (a market interest rate).
	Discount rate	2. The interest rate that the Fed charges commercial banks for very short-term loans of reserves. One of the tools of monetary policy.
	Discount window	The mechanism by which the Fed makes loans to commercial banks, charging them an interest rate that is the discount rate and also sometimes exerting some pressure on the banks to limit their borrowing.
	Discounted present value	Present value.
	Discrete time	The division of time into indivisible units. In economic models, these units represent periods, such as days, quarters, or years.
	Discretionary licensing	See licensing.
	Discriminatory tariff	A higher tariff against one source of imports than against another. Except in special circumstances, such as anti-dumping duties, this is a violation of MFN and is prohibited by the WTO against other members.
	Diseconomies of scale	Decreasing returns to scale.
	Disequilibrium	1. Inequality of supply and demand.
	Disequilibrium	2. An untenable state of an economic system, from which it may be expected to change.
	Disguised protection	Any policy other than a tariff or other border measure that has the effect of benefiting a domestic industry and cannot be justified as correcting a distortion.
	Disintegration	Another term for fragmentation. Used by Feenstra (1998).
	Disinvest	1. To allow a stock of capital to become smaller over time, either by selling parts of it or by allowing it to depreciate without replacing it.
	Disinvest	2. To reduce inventories, either absolutely or by more than any increase in plant and equipment.
	Disinvest	3. To sell all or a portion of a portfolio of financial assets.
	Disparity	Inequality, usually income disparity.
	Disposable income	Income minus taxes. More accurately, income minus direct taxes plus transfer payments; that is, the income available to be spent (including on imports) and saved.
	Dispute settlement	In the GATT, the adjudication of disputes among parties. In the WTO this is done by the dispute settlement mechanism.
	Dispute Settlement Body	The entity within the WTO that formally deals with disputes between members. It consists of all WTO members meeting together to consider reports of panels and the Appellate Body.
	Dispute settlement mechanism	The procedure by which the WTO settles disputes among members, primarily by means of a three-person panel that hears the case and issues a report, subject to review by the Appellate Body.
	Dissipate rent	To use up, in real resources, the full value of the economic rents that are being sought by rent seeking.
	Distortion	Any departure from the ideal of perfect competition that therefore interferes with economic agents maximizing social welfare when they maximize their own. Includes taxes and subsidies, tariffs and NTBs, externalities, incomplete information, and imperfect competition. Same as market imperfection.
	Distribution	1. The productive activity of getting produced goods from the factory into the hands of consumers.
	Distribution	2. The amounts of income or wealth in the hands of different portions of a population.
	Diversification cone	For given prices in the Heckscher-Ohlin Model, a set of factor endowment combinations that are consistent with producing the same set of goods and having the same factor prices. Such a set has the form of a cone. Concept first used by McKenzie (1955).
	Diversified portfolio	A portfolio that includes a variety of assets whose prices are not likely all to change together. In international economics, this usually means holding assets denominated in different currencies.
	Diversify	To produce more than one thing. In the Heckscher-Ohlin Model with two goods, it means to produce both of them. With more than two goods, it may mean to produce two, or it may mean to produce all of the goods that are possible.
	Diversion	See trade diversion.
	Dividend	The amount paid each quarter by a corporation to its stockholders for each share of stock.
	Division of labor	Splitting a production process across multiple workers, each performing a different task repeatedly rather than having a single worker perform all tasks. Adam Smith (1776) pointed out the increased productivity that can result, as well as the potential for gains from trade when division of labor takes place across countries.
	Dixit-Stiglitz function	Really just a symmetric CES function, the innovation of Dixit and Stiglitz (1977) (and earlier Spence (1976)) was to allow the number of arguments to be variable. Used originally as a utility function, with elasticity of substitution greater than one the function displays a preference for variety. Used as a component of a production function, the same property implies that costs fall with variety. Also called the Spence-Dixit-Stiglitz function.
	Dixit-Stiglitz utility	The Dixit-Stiglitz function used as a utility function.
	Doha Declaration	The document agreed upon by the trade ministers of the member countries of the WTO at the Doha Ministerial meeting. It initiates negotiations on a range of some 21 subjects. A distinctive feature is the emphasis placed on the interests of developing countries.
	Doha Ministerial	The WTO ministerial meeting held in Doha, Qatar, November 10-14, 2001, at which it was agreed to begin a new round of multilateral trade negotiations, the Doha Round.
	Doha Round	The round of multilateral trade negotiations begun January 2002 as a result of agreement at the Doha Ministerial. Also called the Doha Development Round or the Doha Development Agenda.
	Dollar standard	An international financial system in which the U.S. dollar is used by most countries as the primary reserve asset, in contrast to the gold standard in which gold played this role.
	Dollarization	The official adoption by a country other than the United States of the U.S. dollar as its local currency.
	Domestic	From or in one's own country. A domestic producer is one that produces inside the home country. A domestic price is the price inside the home country. Opposite of "foreign" or "world."
	Domestic arrears	The amount by which a government has fallen behind in its payment of interest and principal on debt to lenders within its own country.
	Domestic bias	Home bias.
	Domestic content protection	Use of trade policies such as domestic content requirements to increase the portion of a product's value that is provided by domestic factors of production, either in direct production or through produced inputs.
	Domestic content requirement	A requirement that goods sold in a country contain a certain minimum of domestic value added.
	Domestic credit	Credit extended by a country's central bank to domestic borrowers, including the government and commercial banks. In the United States, the largest component by far is the Fed's holdings of U.S. government bonds, but it also makes some short-term loans to banks to use as their reserves.
	Domestic demand	Demand for a product by buyers in one's own country.
	Domestic distortions argument for protection	See second best argument.
	Domestic International Sales Corporation	A type of U.S. corporation, authorized in 1971, with income primarily from exports. Usually wholly owned U.S. subsidiaries, DISCs had special treatment in borrowing or taxation. A 1976 GATT case found against the U.S., which reached a compromise settlement with the EC in 1981. DISC was replaced in 1984 by foreign sales corporations.
	Domestic law	The laws and legal system of a country, which may be constrained by international obligations such as WTO membership. Sometimes a domestic law is inconsistent with such obligations and must be changed. This may be seen as a threat to the country's sovereignty.
	Domestic market	The market within a country's own borders. Dumping, for example, may be defined by comparing the price charged for export with the price charged on the domestic market, i.e., to buyers within the exporting country.
	Domestic resource cost	A measure, in terms of real resources, of the opportunity cost of producing or saving foreign exchange. It is an ex ante measure of comparative advantage, used to evaluate projects and policies. The term was introduced to the economics literature by Bruno (1963, 1972).
	Domestic supply	Supply of a product by sellers in one's own country.
	Domestic support	A policy that assists domestic industry, including a subsidy to production, payment not to produce, price support, and other means of increasing the income of producers.
	Domestic trade	Commerce within a country; wholesale and retail trade.
	DOT	Direction of Trade
	DOTS	Direction of Trade Statistics
	Double counting	Counting the same thing twice, or more than twice. For example, the total value of output of all firms in a country overstates the country's output, since the value of produced inputs is counted again in the value of what they help to produce. To avoid this, GDP is measured either from value added or from only final goods.
	Double switching	Reswitching
	Dow Jones Industrial Average	An index of prices of stocks, based on U.S. stocks of 30 large industrial companies.
	Downstream dumping	The export of a good whose cost is reduced by access to a domestically produced intermediate input that is sold below cost. This is not (yet) eligible under any anti-dumping statute for an anti-dumping duty.
	Drawback	Rebate of import duties when the imported good is re-exported or used as input to the production of an exported good.
	DRC	Domestic resource cost
	DSM	Dispute settlement mechanism
	DUKS	See baffling pigs.
	Dummy	In a regression analysis, a dummy (or dummy variable) is used to capture an explanatory variable that is either on (with a value of one) or off (zero). For example, in a gravity equation, the coefficient on a common-language dummy would measure the effect on trade flow between two countries of their sharing a common language.
	Dumping	Export price that is "unfairly low," defined as either below the home market price (normal value) (hence price discrimination) or below cost. With the rare exception of successful predatory dumping, dumping is economically beneficial to the importing country as a whole (though harmful to competing producers) and often represents normal business practice.
	Dumping margin	In a case of dumping, the difference between the "fair price" and the price charged for export. Used as the basis for setting anti-dumping duties.
	Duopoly	An oligopoly with two firms.
	DUP Activities	Directly Unproductive Profit-Seeking Activities
	Durable good	A good that can continue to be used over an extended period of time.
	Dutch disease	The adverse effect on a country's other industries that occurs when one industry substantially expands its exports, causing a real appreciation of the country's currency. Named after the effects of natural gas discoveries in the Netherlands, and most commonly applied to effects of exports in natural resource extractive industries on manufacturing.
	Dutiable imports	Imports on which a positive duty, or tariff, is levied. (The term seems like it ought to include imports on which the duty is zero but which a government is somehow free, or able, to levy a positive duty. That does not seem to be the way the term is used, however.)
	Duty	Tax. That is, an import duty is a tariff.
	Duty drawback	See drawback.
	Duty-free	Without tariff, usually applied to imports on which normally a tariff would be charged, but that for some reason are exempt. Travelers, for example, may be permitted to import a certain amount duty-free.
	Dynamic comparative advantage	A changing pattern of comparative advantage over time due to changes in factor endowments or technology.
	Dynamic economies of scale	A form of increasing returns to scale in which average cost declines over time as producers accumulate experience, so that average product rises with total output of the firm or industry accumulated over time. See learning by doing, infant industry protection.
	Dynamic effects	Refers to certain poorly understood effects of trade and trade liberalization, including both multilateral and preferential trade agreements, that extend beyond the static gains from trade. Such dynamic effects are thought to make the gains from trade substantially larger than in the static model.
	Dynamic gains from trade	The hoped-for benefits from trade that accrue over time, in addition to the conventional static gains from trade of trade theory. Sources of these gains are not well understood or documented, although there exists a variety of possible theoretical reasons for them and some empirical evidence that countries have benefited more than the static gains alone would suggest.
	Dynamic model	Any model with an explicit time dimension. To be meaningfully dynamic, however, it should include variables and behavior that, at one time, depend on variables or behavior at another time. Models may be formulated in discrete time or in continuous time. Contrasts with a static model.
	Dynamic time path question	The question of whether the creation of preferential trading areas leads toward or away from greater multilateral free trade. More succinctly, are PTAs building blocs or stumbling blocs in the path toward free trade? Asked by Bhagwati (1993), this prompted a large, inconclusive literature.
	Early harvest	A term, in trade negotiations, for agreeing to accept the results of a portion of the negotiations before the rest of the negotiations are completed.
	Earnings	The total amount earned, usually by a worker as wages, or by a firm as profits.
	Earth Summit	Rio Summit.
	Easy money	A monetary policy that is expansionary, thus with low interest rates for borrowing. Contrasts with tight money.
	EBRD	European Bank for Reconstruction and Development.
	EBITDA	Earnings before interest, taxes, depreciation, and amortization of a firm. Sometimes used as an optimistic indicator of potential profitability.
	EC	European Communities
	ECB	European Central Bank
	ECLAC	Economic Commission for Latin America and the Caribbean
	Eco-dumping	Environmental dumping
	Econometric model	A set of equations that have been estimated by econometric methods and that are then used, together, to forecast the economy or to calculate effects of changes in the economy.
	Econometrics	The application of statistical methods to the empirical estimation of economic relationships. Econometric analysis is used extensively in international economics to estimate the causes and effects of international trade, exchange rates, and international capital movements.
	Economic and Monetary Union	The currency area formed in 1999 as a result of the Maastricht Treaty. Members of the EMU share the common currency, the euro.
	Economic and Social Commission for Asia and the Pacific	Regional development commission of the United Nations that deals with Asia and the Pacific. It works in three main areas: poverty reduction; managing globalization; and tackling emerging social issues.
	Economic Commission for Latin America and the Caribbean	One of five regional commissions of the United Nations, contributing to the economic and social development of Latin America and the Caribbean. Headquartered in Santiago, Chile. Established in 1948.
	Economic contraction	The downward phase of the business cycle, in which GDP is falling and unemployment is rising over time.
	Economic cooperation	This could mean many things, including any of the many ways that countries work together in the economic sphere to achieve mutual objectives. Most commonly, it means reducing barriers to trade and international investment and pursuing means to encourage economic growth.
	Economic cost	The monetary cost of an object or action, including reductions in wages, profits, and property values, but not including such nonmonetary costs as adverse consequences for health or safety, or negative effects on others.
	Economic decision	A decision about an economic issue, most commonly about how to allocate resources among multiple purposes.
	Economic development	Sustained increase in the economic standard of living of a country's population, normally accomplished by increasing its stocks of physical and human capital and improving its technology.
	Economic efficiency	The extent to which a given set of resources is being allocated across uses or activities in a manner that maximizes whatever value they are intended to produce, such as output, market value, or utility. Contrasts with engineering efficiency, which focuses within a single activity on the output it produces per unit input.
	Economic expansion	The upward phase of the business cycle, in which GDP is rising and unemployment may be falling over time.
	Economic exposure	Same as exchange rate exposure.
	Economic factor	Any of the considerations that are relevant to a decision and that involve economic variables, such as prices and wages.
	Economic freedom	Freedom to engage in economic transactions, without government interference but with government support of the institutions necessary for that freedom, including rule of law, sound money, and open markets.
	Economic geography	See New Economic Geography.
	Economic growth	The increase over time in the capacity of an economy to produce goods and services and (ideally) to improve the well-being of its citizens.
	Economic indicator	A variable that is measured and publicly reported and that is considered meaningful not only for itself but as a sign of how rapidly the larger economy is expanding or contracting.
	Economic integration	See integration.
	Economic interdependence	The extent to which economic performance (GDP, inflation, unemployment, etc.) in one country depends positively or negatively on performance in other countries.
	Economic justice	1. Fairness and equity in economic affairs, presumably by having laws, governments, and institutions that treat people equally and avoid favoring particular individuals or groups.
	Economic justice	2. As most often used, the term carries a connotation that economic justice can only be achieved by lessening the power and changing the practices of international financial institutions, transnational corporations, and rich-country governments.
	Economic model	A collection of assumptions, often expressed as equations relating variables, from which inferences can be derived about economic behavior and performance.
	Economic nationalism	A preference for supporting a country's own firms, industries, and workers -- and, in the case of firms and other assets, keeping them owned within the country -- even at the expense of the economic gains that could be had from trade and international investment.
	Economic profit	Revenue from an activity minus the opportunity cost of the resources used in that activity.
	Economic rate of return	The net benefits to all members of society, as a percentage of cost, taking into account externalities and other market imperfections.
	Economic relations	Economic activity that involves participants of two countries, most obviously trade but other forms as well. Some pairs of countries that have essentially no political relations nonetheless have economic relations.
	Economic rent	See rent.
	Economic sanction	The use of an economic policy as a sanction.
	Economic slump	Recession or a slowing of the rate of economic growth that comes close to being a recession.
	Economic structure	The major features of a country or region's economy, including what and how much it produces and trades, and how it spends its income.
	Economic union	A common market with the added feature that additional policies -- monetary, fiscal, welfare -- are also harmonized across the member countries.
	Economic variable	Any economic magnitude the size of which may change and is subject to explanation by an economic model. Examples are endless, including consumption, the price of a good, the exchange rate, the tax receipts of a government, the number of children per family, etc.
	Economic welfare	See welfare.
	Economies of scale	Increasing returns to scale.
	Economies of scope	The property that a firm's average cost falls as it produces a larger number of different products.
	Economist, The	A weekly newsmagazine (which calls itself a newspaper), published in the United Kingdom but distributed worldwide. Since it was established in 1843, it has been a champion of free trade.
	ECSC	European Coal and Steel Community
	ECU	European Currency Unit
	Edgeworth-Bowley Box	A geometric device showing allocations of 2 goods to 2 consumers in a rectangle with dimensions equal to the quantities of the goods. Preferences enter as indifference curves relative to opposite corners of the box, tangencies defining efficient allocations and the contract curve. First drawn by Pareto (1906), based originally, though only partially, on a diagram of Edgeworth (1881). This and the Edgeworth production box are often called just the Edgeworth Box, even though Edgeworth never drew either.
	Edgeworth Box	See Edgeworth-Bowley Box and Edgeworth production box.
	Edgeworth Production Box	A variation of the consumption Edgeworth Box that instead represents the allocations of 2 factors to 2 industries for use in production functions. Efficient allocations now appear as tangencies between isoquants, while the contract curve becomes the efficiency locus.
	EEA	European Economic Area
	EEC	European Economic Community
	Effect of trade	This term normally refers, often only implicitly, to the effect of a change in some policy or other exogenous variable that will increase the quantity of trade. Since in trade models, trade itself is endogenous, the effects associated with a change in trade depend on what caused it.
	Effective exchange rate	An index of a currency's value relative to a group (or basket) of other currencies, where the currencies in the basket are given weights based on the amount of trade between the countries that use the currencies. Also called a trade-weighted exchange rate.
	Effective protection	The concept that the protection provided to an industry depends on the tariffs and other trade barriers on both its inputs and its outputs, since a tariff on inputs raises cost. Measured by the effective rate of protection.
	Effective protective rate	Same as effective rate of protection.
	Effective rate of protection	A measure of the protection provided to an industry by the entire structure of tariffs, taking into account the effects of tariffs on inputs as well as on outputs. Letting bij be the share of input i in the value of output j, and ti be the tariff on good i, the ERP of industry j is ERPj = (tj-Sibijti)/(1-Sibij). Due to Corden (1966).
	Effective tariff	Effective rate of protection.
	Efficiency	See economic efficiency.
	Efficiency locus	The set of efficient allocations in an Edgeworth production box. It is usually a curve, similar to a contract curve, and in fact is sometimes called that.
	Efficiency loss	In economics, efficiency loss usually refers to the reduction in economic welfare due to a market imperfection or distortion. The deadweight loss due to a tariff is a good example of an efficiency loss.
	Efficient allocation	An allocation that it is impossible unambiguously to improve upon, in the sense of producing more of one good without producing less of another.
	Efficient capital market	An asset market in which, at a minimum, current price changes are independent of past price changes, or, more strongly, price reflects all (publicly) available information. Some believe foreign exchange markets to be efficient, which in turn implies that future exchange rates cannot profitably be predicted.
	Efficient market	Efficient capital market
	Efficient quantity	In a market with undistorted supply and demand, the quantity at which the supply price equals the demand price. That is efficient, because supply price is the marginal cost and demand price the marginal benefit of an additional unit.
	EFTA	European Free Trade Association
	Elastic	Having an elasticity greater than one. For a price elasticity of demand, this means that expenditure rises as price falls. For an income elasticity it means that expenditure share rises with income, a superior good. Contrasts with inelastic and unit elastic. Elastic demand for either exports or imports is sufficient to satisfy the Marshall-Lerner condition.
	Elastic offer curve	An offer curve along which import demand is always elastic. It is therefore not backward bending. Contrasts with inelastic offer curve.
	Elasticities approach	1. The method of analyzing the determination of the balance of trade, especially due to a devaluation, that focuses on the price elasticities of exports and imports. According to this approach, the effect depends critically on the Marshall-Lerner Condition.
	Elasticities approach	2. The explanation of exchange rates using supply and demand curves.
	Elasticity	A measure of responsiveness of one economic variable to another -- usually the responsiveness of quantity to price along a supply or demand curve -- comparing percentage changes (%D) or changes in logarithms (d ln). The arc elasticity of x with respect to y is e = %Dx/%Dy. The point elasticity is e = d lnx/d lny = (y/x)(dx/dy).
	Elasticity of demand for exports	This is normally the price elasticity of demand for exports of a country, either for a single industry or for the aggregate of all imports. Equals the rest of world's elasticity of demand for imports, which therefore also enters the Marshall-Lerner condition.
	Elasticity of demand for imports	This is normally the price elasticity of demand for imports of a country, either for a single industry or for the aggregate of all imports. The latter plays a critical role in determining how the country's balance of trade responds to the exchange rate. See Marshall-Lerner condition.
	Elasticity of substitution	The elasticity of the ratio of two inputs to a production (or utility) function with respect to the ratio of their marginal products (or utilities). With competitive demands, this is also the elasticity with respect to their price ratio. For example, with factors L,K and factor prices w,r, the elasticity of substitution of a production function F(K,L) is s = (wL/rK)d(K/L)/d(w/r).
	Elasticity of transformation	The elasticity of an economy's output of one good with respect to its output of another (holding other outputs, if there are any, constant).
	Elasticity pessimism	The view that elasticities of demand for imports are sufficiently small that the Marshall-Lerner Condition will be violated. See Machlup (1950).
	EMA	European Monetary Agreement
	Embargo	The prohibition of some category of trade. May apply to exports and/or imports, of particular products or of all trade, vis a vis the world or a particular country or countries.
	Emerging economy	1. Originally this term was applied to countries that had recently ceased to be part of the Soviet Union and its satellites, and thus emerging from centrally planned communist economies. The term drew attention to their transition to becoming market economies.
	Emerging economy	2. Rather quickly, perhaps acknowledging the importance of central planning and the failure of markets in many other countries, the term has expanded to encompass also developing countries, not necessarily ever communist, as they expanded the role of markets.
	Emerging market	1. Coined in the early 1980s by World Bank economist Antoine van Agtmael to describe "economies with low-to-middle per capita income" according to Financial Times Oct 20, 2006.
	Emerging market	2. Same as emerging economy.
	Emerging market	3. The securities market of an emerging economy.
	EMI	European Monetary Institute
	Emigration	The migration of people out of a country.
	Empirical finding	Something that is observed from real-world observation or data, in contrast to something that is deduced from theory.
	Employment	People working for pay or in a family-owned enterprise or farm. Much more specific definitions are used for measuring employment by national statistical agencies such as the US Bureau of Labor Statistics. Contrasts with unemployment.
	Employment argument for protection	The use of a tariff or other trade restriction to promote employment, either in the economy at large or in a particular industry. This is a second best argument, since other policies -- such as a fiscal stimulus or a production subsidy -- could achieve the same effect at lower economic cost.
	EMS	European Monetary System
	EMU	Economic and Monetary Union
	Enabling Clause	The decision of the GATT in 1979 to give developing countries special and differential treatment.
	Endogenous	1. Something that depends on other things, which should be taken into account in an analysis.
	Endogenous	2. Endogenous variable
	Endogenous growth	Economic growth whose long-run rate depends on behavior and/or policy.
	Endogenous protection	Protection that is explained as the outcome of economic and/or political forces. See political economy of protection.
	Endogenous variable	An economic variable that is determined within a model. It is therefore not subject to direct manipulation by the modeler, since that would override the model. In trade models, the quantity of trade itself is almost always endogenous. Contrasts with exogenous variable.
	Endowment	The amount of something that a person or country simply has, rather than their having somehow to acquire it. In the H-O Model of trade theory, endowments refer to primary factors of production, ignoring the fact that some of them -- especially capital and skill -- are deliberately accumulated.
	Enemy	See natural enemy.
	Engine of growth	Term sometimes used to describe the role that exports may have played in economic development, both of some of the regions of recent settlement in the nineteenth century and of today's NICs.
	Engineering efficiency	See economic efficiency.
	Enterprise	A firm.
	Entrepôt trade	The import and then export of a good without further processing, usually passing through an entrepôt which is a storage facility from which goods are distributed. See reexports.
	Entrepreneur	A person who starts a business.
	Entrepreneurship	The talent, knowledge, and willingness to engage in new activities, especially those that may result in new kinds of firms.
	Entry barrier	A natural or artificial impediment to a firm beginning to operate in an industry. Entry barriers give a first mover advantage to firms already in an industry, and these are often national firms in competition with potential foreign entrants.
	Entry writer	An employee of the customs service whose job is to establish the correct tariff treatment of an imported good by identifying its proper classification.
	Envelope	The outermost points traced out by a moving curve.
	Environmental dumping	Export of a good from a country with weak or poorly enforced environmental regulations, reflecting the idea that the exporter's cost of production is below the true cost to society, providing an unfair advantage in international trade. Also called eco-dumping.
	Environmental Kuznets Curve	An inverse U-shaped relationship hypothesized between per capita income and environmental degradation. Named after the Kuznets Curve dealing with inequality. Idea due to Grossman and Krueger (1993).
	Environmental protection argument for a trade intervention	The view that trade should be restricted in order to help the environment. Examples include embargos on imports made from endangered species, limits on imports produced by methods harmful to the atmosphere, and restrictions on investment into locations with lax environmental standards. This is usually a second-best argument.
	Environmental subsidy	A subsidy intended for environmental purposes. A subsidy for adapting existing facilities to new environmental laws or regulations is non-actionable under WTO rules.
	EPU	European Payments Union.
	EPZ	Export processing zone.
	Equalization	See factor price equalization.
	Equation of Exchange	M´V = P´Q, where M is the quantity of money in an economy, V is the velocity of money, P is the price level, and Q is the real output of the economy. The equation is true by definition because it implicitly defines velocity of money. It is central to the quantity theory of money.
	Equilibrium	1. A state of balance between offsetting forces for change, so that no change occurs.
	Equilibrium	2. In competitive markets, equality of quantity supplied and quantity demanded.
	Equilibrium exchange rate	This is ambiguous, since there is no single agreed upon model of the exchange rate:
	Equilibrium exchange rate	1. The exchange rate at which supply and demand for a currency are equal.
	Equilibrium exchange rate	2. The exchange rate at which there is balance of payments equilibrium.
	Equilibrium exchange rate	3. The exchange rate at which purchasing power parity holds, in some form.
	Equilibrium exchange rate	4. The exchange rate at which the expected change in the exchange rate, in the near future, is zero.
	Equilibrium exchange rate	5. The exchange rate at which the country's international reserves are neither rising nor falling.
	Equilibrium level	The value taken on by an economic variable in equilibrium, as opposed either to some other value, or to its rate of change.
	Equilibrium position	Same as equilibrium level, though perhaps of several variables at once, perhaps as displayed in a graph.
	Equilibrium terms of trade	The terms of trade at which the country's excess supply of each good to the world market equals the world market's excess demand. If the country is a small open economy, whose excess supplies and demands are therefore negligible, then this is simply calculated from given world prices.
	Equity	Share in the ownership of a corporation; more commonly called a stock, as in the stock market.
	Equivalent quota	The quota that sets the same level of imports that is entering a country under a tariff, or perhaps under some other NTB.
	Equivalent tariff	Tariff equivalent.
	Equivalent variation	The amount of money that, paid to a person, group, or whole economy, would make them as well off as a specified change in the economy. Provides a monetary measure of the welfare effect of that change that is similar to, but not in general the same as, compensating variation.
	ERM	Exchange Rate Mechanism
	ERP	Effective rate of protection
	ERR	Economic rate of return
	Escalation	1. Regarding the structure of tariffs, see tariff escalation.
	Escalation	2. In the context of a trade war, escalation refers to the increase in tariffs that occurs as countries retaliate again and again.
	ESCAP	Economic and Social Commission for Asia and the Pacific.
	Escape clause	1. The portion of a legal text that permits departure from its provisions in the event of specified adverse circumstances.
	Escape clause	2. The U.S. statute (section 201, 1974 trade act) that permits imports to be restricted, for a limited time and on a nondiscriminatory basis, if they have caused injury to U.S. firms or workers. The escape clause accords with the Safeguards Clause (Article XIX) of the GATT.
	Ethical trade	As used by the Ethical Trading Initiative, this term refers primarily to trade that conforms with high levels of labor standards, including the avoidance of child labor, forced labor, sweatshops, adverse health and safety conditions, and violations of labor rights.
	Ethical Trading Initiative	An alliance of multinational companies, nongovernmental organizations, and labor unions seeking to promote and identify ethical trade.
	ETI	Ethical Trading Initiative
	ETSG	European Trade Study Group
	EU	European Union
	EU15	The 15 members of the European Union from 1995 through 2003, prior to its 2004 enlargement.
	EU enlargement	The process of taking more member countries into the EU.
	Euler's Theorem	1. The property of a function X=F(V) that is homogeneous of degree N that SiVi?F/?Vi=NX.
	Euler's Theorem	2. The useful implication of this that, for a production function X=F(V) with constant returns to scale, the competitive payments to factors sum to the value of output: SiwiVi=pX.
	Euratom	The European Atomic Energy Community, created in 1956 along with the EEC.
	Euribor	Stands for the Euro Interbank Offered Rate, a euro-denominated interest rate charged by large banks among themselves on euro-denominated loans. Analogous to LIBOR for the euro.
	Euro	The common currency of a subset of the countries of the EU, adopted January 1, 1999, with paper notes and coins put into circulation January 1, 2002.
	Euro-Mediterranean Partnership	An declaration at a 1995 conference in Barcelona between the 15 members of the European Union and its 12 Mediterranean partners to enter a new phase in their relationship, promoting peace and stability, free trade, and cultural understanding. Also called the Barcelona Process.
	Euro Zone	The countries of the EMU. That is, the group of European countries, members of the EU, that adopted the common currency, the euro. See baffling pigs.
	Eurobond	A bond that is issued outside of the jurisdiction of any single country, denominated in a eurocurrency.
	Eurocurrency	See Eurodollar.
	Eurodad	A European network of NGOs working to reduce poverty and empower the poor in developing countries through improved economic and financial policies.
	Eurodollar	Originally referred to U.S. dollar-denominated deposits in commercial banks located in Europe. Over time, the term came to include deposits in a commercial bank in any country denominated in any currency other than that of the country. Now sometimes called eurocurrencies.
	Europe 1992	An initiative, begun with the Single European Act in 1987 by the European Union, to fully integrate the markets of the member countries by the end of 1992. The process involved extensive harmonization of laws and regulations that would otherwise interfere with the cross-border movement of goods and services.
	Europe Agreement	An agreement between the EU and each of ten Eastern European countries (starting with Hungary and Poland in 1994) creating free trade areas and establishing additional forms of political and economic cooperation in preparation for these countries' eventual membership in the EU.
	European Bank for Reconstruction and Development	An international financial institution that supports primarily private-sector projects in countries from Central Europe to Central Asia.
	European Central Bank	The central bank of the Euro Zone -- the group of countries using the euro as their currency.
	European Coal and Steel Community	An economic agreement in 1951 among six countries of Western Europe -- Belgium, France, Germany, Italy, Luxembourg, and Netherlands -- that preceded formation of the EEC and ultimately the EU.
	European Communities	The name adopted in 1967 by the European Economic Community when it merged with the ECSC and Euratom. This name and the acronym EC was used until 1992 when it was replaced by European Union.
	European Currency Unit	A composite currency that is a basket of most of the currencies of countries in the European Union. Conceived in 1979, it has been used as a unit of account of the European Monetary System.
	European Economic Area	The group of countries comprised of the EU together with EFTA. The two groups have agreed to deepen their economic integration.
	European Economic Community	A customs union formed in 1958 by the Treaty of Rome among six countries of Europe: Belgium, France, Germany, Italy, Luxembourg, and Netherlands; predecessor to the EC in 1967 and the EU in 1992.
	European Free Trade Association	A free trade area made up of countries in Europe that did not join the European Economic Community. EFTA was established in 1960 among Austria, Denmark, Norway, Portugal, Sweden, Switzerland, and the United Kingdom. As of 2007 it includes Iceland, Liechtenstein, Norway, and Switzerland.
	European Monetary Agreement	An intergovernmental organization administered by the OECD that facilitated settlement of balance of payments accounts among its member states from 1958 to 1972. It replaced the EPU, and its functions were taken over by the IMF in 1972.
	European Monetary Institute	A temporary institution that existed from January 1994 to June 1998 during the years leading up to the European Central Bank and the introduction of the euro. It's purpose was to facilitate cooperation and coordination among the central banks of the EU and to pave the way for the shift to the euro.
	European Monetary System	A currency union formed by some of the members of the EEC in 1979 that continued, with changing membership, until replaced by the EMU and the euro in 1999.
	European Payments Union	An international arrangement for settling payments among member countries in Europe during a period in which many of the countries' currencies were not convertible. The EPU functioned from 1950 to 1958, after which it was replaced by the EMA.
	European Recovery Program	See Marshall Plan.
	European single market	See single market.
	European Trade Study Group	A group that meets annually for conferences on the economics of international trade.
	European Union	A group of European countries that have chosen to integrate many of their economic activities, including forming a customs union and harmonizing many of their rules and regulations. Preceded by EEC and EC. As of January 1, 2007, the EU had 27 member countries.
	Eurozone	1. The Euro Zone.
	Eurozone	2. Pertaining to the Euro Zone or the euro.
	Eurozone bonds	Bonds denominated in euros.
	Even case	In international trade models with multiple goods and factors, this is the special case of an equal number of goods and factors. It is convenient for analysis, because the matrix of factor input requirements is square and therefore potentially invertible.
	Everything But Arms	The name given by the EU to its decision in 2001 to eliminate quotas and tariffs on all products except arms from the world's 48 poorest countries.
	Ex ante	Before the fact; that is, before some event has taken place.
	Ex ante analysis	Analysis of the effects of a policy, such as trade liberalization or formation of a PTA, based only on information available before the policy is undertaken. Also prospective analysis.
	Ex factory	Applied to a price, this means the price at the factory, and does not include any other charges, such as delivery or subsequent taxes.
	Ex post	After the fact; that is, after some event has taken place.
	Ex post analysis	Analysis of the effects of a policy, such as trade liberalization or formation of a PTA, based on information available after the policy has been implemented and its performance observed. Also retrospective analysis.
	Ex works	Ex factory.
	Ex post tariff	Implicit tariff.
	Excess demand	Demand minus supply. Thus a country's demand for imports of a homogeneous good is its excess demand for that good.
	Excess profit	Profit of a firm over and above what provides its owners with a normal (market equilibrium) return to capital.
	Excess supply	Supply minus demand. Thus a country's supply of exports of a homogeneous good is its excess supply of that good.
	Exchange	1. To engage in trade, either within a country or internationally.
	Exchange	2. Foreign exchange.
	Exchange control	Rationing of foreign exchange, typically used when the exchange rate is fixed and the central bank is unable or unwilling to enforce the rate by exchange-market intervention.
	Exchange economy	See pure exchange economy.
	Exchange equalization fund	The unit within a government or central bank that manages a pegged exchange rate. It manages reserves of foreign currencies, which it uses to buy and sell domestic currency as needed to keep the exchange rate within specified bounds.
	Exchange market	1. The market on which national currencies are exchanged for one another.
	Exchange market	2. The actual exchange market, which exists primarily among large international banks. Others who wish to exchange currencies do it through these banks.
	Exchange market	3. The theoretical representation of the exchange market as either the interaction of supply and demand arising from exchange-market transactions or as an asset market equilibrium between currencies.
	Exchange market intervention	Usually done by a country's central bank, this is the purchase and sale of the country's currency on the exchange market in order to influence or fully determine its price. These transactions, unless they are sterilized, change the monetary base of the country and thus its money supply.
	Exchange rate	The price at which one country's currency trades for another, typically on the exchange market.
	Exchange rate determination	The process by which a country's exchange rate comes to be what it is. With a floating exchange rate, this may be modeled in various ways, including the elasticities approach, the monetary approach, the portfolio approach, and the asset approach.
	Exchange rate exposure	The extent to which the stock-market value of a firm varies with changes in exchange rates. Also called economic exposure.
	Exchange Rate Mechanism	A system that was operated by some central banks within the European Union, which intervened in exchange markets to limit the fluctuations of their currencies relative to one another, while letting all of them collectively float.
	Exchange rate overshooting	The response of an exchange rate to a shock by first moving beyond where it will ultimately settle. Thought to help explain exchange rate volatility, this was first modeled by Dornbusch (1976).
	Exchange rate pass-through	See pass-through.
	Exchange rate protection	The manipulation of the exchange rate so as to increase the domestic prices of, and demand for, domestically produced goods. Since an undervalued currency stimulates demand for all domestically produced tradable goods, this form of protection, unlike tariff protection, can only be provided to the tradable sector as a whole, not to individual industries.
	Exchange rate regime	The rules under which a country's exchange rate is determined, especially the way the monetary or other government authorities do or do not intervene in the exchange market. Regimes include floating exchange rate, pegged exchange rate, managed float, crawling peg, currency board, and exchange controls.
	Exchange rate risk	Exchange risk
	Exchange rate stability	Lack of movement over time in the exchange rate of a country.
	Exchange rate target	See target.
	Exchange rationing	See exchange control or ration foreign exchange.
	Exchange risk	Uncertainty about the value of an asset, liability, or commitment due to uncertainty about the future value of an exchange rate. Unless they cover themselves in the forward market, traders with commitments to pay or receive foreign currency in the future bear exchange risk. So do holders of assets and liabilities denominated in foreign currency.
	Exchange stabilization fund	A government institution sometimes used to handle exchange market intervention, charged with the explicit function of smoothing exchange rate fluctuations.
	Excise subsidy	A subsidy paid on production or sale (consumption) of a particular good.
	Excise tax	A tax on production or sale (consumption) of a particular good.
	Exercise	To execute the terms of a contract. See option.
	Exhaustion	1. In intellectual property regimes, the transaction at which rights terminate. Under national exhaustion, rights end with first sale in a country, preventing parallel imports. Under international exhaustion, rights end with first sale anywhere, permitting parallel imports.
	Exhaustion	2. Product exhaustion
	Exogenous	Coming from outside, usually in the context of an economic model, in which it means only that it is not explained within the model.
	Exogenous growth	Economic growth that occurs without being the result of deliberate policy or behavior. The term arises because neoclassical growth models converge to a steady state in which per capita income is constant over time. Growth, then, requires exogenous technical progress.
	Exogenous variable	A variable that is taken as given by an economic model. It therefore is subject to direct manipulation by the modeler. In most models, policy variables such as tariffs and par values of pegged exchange rates are exogenous. Contrasts with endogenous variable.
	Expansion	Economic expansion
	Expansionary	Tending to cause aggregate output (GDP) and/or the price level to rise. Term is typically applied to monetary policy (an increase in the money supply or a decrease in interest rates) and to fiscal policy (an increase in government spending or a tax cut), but may also apply to other macroeconomic shocks. Contrasts contractionary.
	Expectation	The expectation of a variable is the same as its expected value, and is also used with both meanings.
	Expected value	1. The mathematical expected value of a random variable. Equals the sum (or integral) of the values that are possible for it, each multiplied by its probability.
	Expected value	2. What people think a variable is going to be. In general, the expectation in this second sense may be more important than the first for determining behavior on a market, such as the exchange market.
	Expenditure share	The fraction of expenditure (usually consumer expenditure) that is spent on a particular good or purpose. With Cobb-Douglas preferences, expenditure shares are constant, independent of prices and income.
	Experience good	A product whose value can be better known after having consumed it. Producers of experience goods may temporarily charge a price lower than marginal cost to induce buyers to try the product. Done with an export, this would be legally considered dumping.
	Exploit	To take advantage of someone or something for one's own benefit. Economists often use the term with a neutral or positive connotation, advocating that one should fully exploit one's resources for example. Others see the term as quite negative, viewing exploitation as being done at the expense of others, which in some cases (e.g., monopsony) it is.
	Export	1. A good that moves outward across a country's border for commercial purposes.
	Export	2. A product, which might be a service, that is provided to foreigners by a domestic producer.
	Export	3. To cause a good or service to be an export under definitions 1 and/or 2.
	Export bias	Any bias in favor of exporting. Most often applied to growth that is based disproportionately on accumulation of the factor used intensively in the export industry and/or technological progress favoring that industry.
	Export cartel	A cartel of exporting countries or firms.
	Export credit	A loan to the buyer of an export, extended by the exporting firm when shipping the good prior to payment, or by a facility of the exporting country's government. In the latter case, by setting a low interest rate on such loans, a country can indirectly subsidize exports.
	Export credit insurance	A program to guarantee payment to exporting firms who extend export credits.
	Export elasticity	This could be any of several elasticities, including that of demand for, or supply of, a country's exports, either total or for particular products, with respect to particular prices or income.
	Export elasticity of substitution	This is the elasticity of substitution in demand for a country's exports of a product relative to the exports of another country of that product, both to a particular importing country, with respect to the relative price of the two exporting countries' exports.
	Export facilitation	Anything intended to make it easier to export, but usually refers to government services or programs with this objective.
	Export-import company	A firm whose business consists mainly of international trade: buying goods in one country and selling them in another, thus both exporting and importing. Same as import-export company.
	Export incentive	A government program that makes it more attractive for a firm, industry, or country to export. Most simply, an export subsidy.
	Export insurance	Insurance available to those who export to cover risks such as damage to the product in transit, nonpayment, and political risks.
	Export intensity	The fraction of the output of a firm, or sometimes an industry within a country, that is exported.
	Export led growth	Growth of an economy over time that is thought to be caused by expansion of the country's exports. See export promotion, engine of growth.
	Export licensing	See licensing.
	Export limitation	Any policy that restricts exports.
	Export multiplier	The multiplier for a change in exports; that is, the increase in GDP caused by a one-unit increase in exports.
	Export parity price	The price that a producer gets or can expect to get for its product if exported, equal to the f.o.b. price minus the costs of getting the product from the farm or factory to the border. This and the import parity price together define a range of the possible equilibrium prices for an equivalent domestically produced good.
	Export penetration	The ability of domestic producers to penetrate foreign markets, as measured by the ratio of exports to output of a domestic firm or industry.
	Export performance requirement	Export requirement.
	Export pessimism	The view that efforts to expand exports by developing countries will lead to a decline in their terms of trade because of an inability (due to weak demand) or unwillingness (expressed via protection) of developed countries to absorb these exports.
	Export platform	The use of a country or region as a place to produce for export to another country. Used especially when a preferential trade arrangement provides easier access to the destination country.
	Export platform FDI	Foreign direct investment from a source country into a host country for the purpose of exporting to a third country.
	Export price index	Price index of the goods that a country exports.
	Export processing zone	A designated area in a country in which firms can import duty-free so long as the imports are used as inputs to production of exports.
	Export promotion	A strategy for economic development that stresses expanding exports, often through policies to assist them such as export subsidies. The rationale is to exploit a country's comparative advantage, especially in the common circumstance where an over-valued currency would otherwise create bias against exports. Contrasts with import substitution.
	Export quantity index	Quantity index of the goods that a country exports.
	Export quota	A quantitative restriction on exports, often the means of implementing a VER.
	Export requirement	A requirement by the government of the host country of FDI that the investor export a certain amount or percentage of its output.
	Export similarity index	A measure of the extent to which two countries export the same products. Defined for exporting countries j and k as XSjk = Si[min(Xij,Xik)´100], where Xij,Xik are the shares of product i in their total exports. XSjk ranges from zero if they have no exports in common to 100 if they export the same things in the same proportions.
	Export subsidy	1. A subsidy to exports; that is, a payment to exporters of a good per unit of the good exported.
	Export subsidy	2. Sometimes applied to any payments to producers that lead to an increase in exports.
	Export tariff	A tax on exports, more commonly called an export tax.
	Export tax	A tax on exports.
	Exposure	See exchange rate exposure.
	Expropriate	To transfer ownership of private property, against the will of its owner, to government. The possibility of expropriation is one of the risks of foreign direct investment.
	Extensive margin	Refers to varying the amount of trade (or other activity) of a firm, industry, or country by varying the number of products that it trades, as opposed to the intensive margin at which it would vary the quantity of trade of a given number of products.
	External balance	1. Balance of payments equilibrium.
	External balance	2. Any target value for the balance on current account, balance on capital account, or balance of payments. Contrasts with internal balance.
	External benefit	A positive (i.e., beneficial) externality.
	External cost	A negative (i.e., harmful) externality.
	External debt	The amount that a country owes to foreigners, including the debts of both the country's government and its private sector.
	External deficit	Trade deficit or current account deficit.
	External diseconomy	Negative externality.
	External economies of scale	A form of increasing returns to scale in which productivity and thus costs of individual firms depend on the output of their entire industry, rather than just their own. Unlike more conventional (internal) scale economies, these are consistent with perfect competition.
	External economy	Positive externality.
	External equilibrium	External balance, in contrast to internal equilibrium or internal balance.
	External increasing returns to scale	External economies of scale.
	External position	The balance of trade or the balance on current account.
	Externalities argument for protection	The (second best) argument that an industry should be protected because it generates positive externalities for other industries or consumers.
	Externality	An effect of one economic agent's actions on another, such that one agent's decisions make another better or worse off by changing their utility or cost. Beneficial effects are positive externalities; harmful ones are negative externalities.
	Facilitating payment	A facilitating (or facilitation) payment is a payment for "routine governmental action," such as providing normal government services. It is, in fact, a bribe, but a small one that does not induce illegal or exceptional behavior. Making such a payment abroad is legal for U.S. firms under the Foreign Corrupt Practices Act, but not for U.K. or German firms, and it is also illegal in many countries where payments are made.
	Factor	1. Primary factor.
	Factor	2. Sometimes refers to any input to production.
	Factor	3. Anything that helps to cause something, as a "contributing factor."
	Factor abundance	The abundance or scarcity of a primary factor of production. Because, in the short run at least, the supplies of primary factors are more or less fixed, this can be taken as given for determining much about a country's trade and other economic variables. Fundamental to the H-O Model.
	Factor accumulation	An increase in the quantity of a factor, usually capital or sometimes human capital.
	Factor augmenting	Said of a technological change or technological difference if production functions differ by scaling of a factor input only: F2(V1,V2)=F1(lV1,V2), where F1(·) and F2(·) are the production functions being compared, V1 is the factor being augmented, V2 is a vector of all other factor inputs, and l is a constant.
	Factor bias	See bias.
	Factor content	The amounts of primary factors used in the production of a good or service, or a vector of quantities of goods and services, such as the factor content of trade of the factor content of consumption. Can be either direct or direct-plus-indirect.
	Factor content pattern of trade	The trade pattern of a country or the world, focusing on factor content of the goods and services that are traded, as opposed to the commodity pattern of trade.
	Factor cost	The cost of the factors used in production. The term is used especially when the value of economic activity in a sector or an economy can be measured or valued either at "factor cost," adding up payments to factors, or at "market value or market price," adding up revenues from goods sold.
	Factor endowment	The quantity of a primary factor present in a country. See endowment.
	Factor income	The total earnings of a factor, thus its factor price times the quantity of factor service that it provides.
	Factor intensity	The relative importance of one factor versus others in production in an industry, usually compared across industries. Most commonly defined by ratios of factor quantities employed at common factor prices, but sometimes by factor shares or by marginal rates of substitution between factors.
	Factor intensity reversal	A property of the technologies for two industries such that their ordering of relative factor intensities is different at different factor prices. For example, one industry may be relatively capital intensive compared to the other at high relative wages and labor intensive at low relative wages. Some propositions of the Heckscher-Ohlin Model require the absence of FIRs.
	Factor intensity uniformity	The absence of factor intensity reversals.
	Factor market	The market for a factor of production, such as labor or capital, in which supply and demand interact to determine the equilibrium price of the factor.
	Factor mobility	The degree to which a factor of production, such as labor or capital, is able to move, either among industries or among countries, in response to differences in its factor price, thus tending to eliminate such differences.
	Factor movement	International factor movement.
	Factor of production	Factor (definition 1).
	Factor payment	The amount paid to a factor for its service in production.
	Factor price	The price paid for the services of a unit of a primary factor of production per unit time. Includes the wage or salary of labor and the rental prices of land and capital. Does not normally refer to the price of acquiring ownership of the factor itself, which might be called the "purchase price."
	Factor price equalization	The tendency for trade to cause factor prices in different countries to become identical. Ohlin (1933) argued that trade would bring factor prices closer together. Samuelson (1948, 1949) showed formally the circumstances under which they would actually become equal.
	Factor Price Equalization Theorem	One of the major theoretical results of the Heckscher-Ohlin Model with at least as many goods as factors, showing that free and frictionless trade will cause FPE between two countries if they have identical, linearly homogeneous technologies and their factor endowments are sufficiently similar to be in the same diversification cone.
	Factor price frontier	A curve in factor space showing the minimum combinations of factor prices consistent with absence of profit in producing one or more goods, given their prices. Since, with perfect competition, profit implies disequilibrium, this shows a lower bound on equilibrium factor prices.
	Factor-price space	A graph with factor prices on the axes.
	Factor productivity	1. The productivity of a single factor may refer to either its marginal or its average product.
	Factor productivity	2. Total factor productivity.
	Factor proportions	1. The ratios of factors employed in different industries. See factor intensities.
	Factor proportions	2. The ratios of factors with which different countries are endowed. See factor endowments.
	Factor Proportions Model	The Heckscher-Ohlin Model of trade.
	Factor reversal	See factor intensity reversal.
	Factor-saving	Biased in favor of using less of a particular factor.
	Factor scarcity	See factor abundance.
	Factor service	The input that a factor provides to the productive process, such as man-hours of labor, acre-months of land, etc.
	Factor share	The fraction of payments to value added in an industry that goes to a particular primary factor.
	Factor space	A graph in which the axes measure quantities of factors.
	Factor-using	Biased in favor of using more of a particular factor.
	Factory gate price	Ex factory price.
	Fair price	1. In anti-dumping cases, the price to which the export price is compared, which is either the price charged in the exporter's own domestic market or some measure of their cost, both adjusted to include any transportation cost and tariff needed to enter the importing country's market. See dumping.
	Fair price	2. In the context of the Fair Trade Movement, a fair price is a price that, when paid to the individual producers of a product such as coffee or handicrafts, gives them access to a viable standard of living, including nutrition, health care, education, and cultural autonomy.
	Fair trade	In the context of the Fair Trade Movement, this is international trade in which producers are paid a fair price.
	Fair Trade Movement	A system overseen by several international NGOs, in which products of developing countries are purchased at a fair price from individual producers and sold with a fair trade label to consumers in developed countries. These intermediaries also seek to promote other objectives, including environmental sustainability and capacity building, while keeping prices to consumers low by bypassing more conventional intermediaries.
	Fairness argument for protection	The view that it is unfair to force domestic firms to compete with foreign firms that have an advantage, either in terms of low wages or due to foreign government policies. This misinterprets economic activity as a game, the purpose of which is to win, rather than as a means of using limited resources to satisfy human needs. See level playing field.
	FAO	Food and Agriculture Organization of the United Nations
	Farm subsidy	Payments by governments to farmers. These may be in return for producing, as when government buys a crop at a higher-than-market price; for not producing, as when it pays to leave land uncultivated; or for neither, as when payments are made independently of crop size for income maintenance or environmental purposes.
	FAS	Same as FOB but without the cost of loading onto a ship. Stands for "free alongside ship."
	FASB	Financial Accounting Standards Board
	Fast track	A procedure adopted by the U.S. Congress, at the request of the President, committing it to consider trade agreements without amendment. In return, the President must adhere to a specified timetable and other procedures. Introduced in the Trade Act of 1974. See trade promotion authority.
	FATS	Foreign Affiliates Trade in Services
	Favorable exchange rate	An exchange rate different from the market or official rate, provided by the government on a transaction as an indirect way of providing a subsidy.
	FCA	Free carrier
	FCPE	Formerly centrally planned economy
	FDI	Foreign Direct Investment
	FDI inflow	Property located within the domestic country acquired by a foreign owner.
	FDI outflow	Property acquired abroad by a domestic owner.
	FDI spillover	See spillover.
	Fear of floating	The resistance by many countries with officially floating exchange rates to allowing their currencies to move as much as the market would require. Term used by Calvo and Reinhart (2002).
	Fed	The Federal Reserve System of the United States.
	Federal budget deficit	The budget deficit of the federal (i.e., national, in a country composed of states) government.
	Federal funds rate	The interest rate on very short-term loans from one commercial bank to another in the United States. This rate is used as a target for monetary policy by the Fed.
	Federal Reserve System	The central bank of the United States.
	FEER	Fundamental equilibrium exchange rate
	Feldstein-Horioka puzzle	The finding by Feldstein and Horioka (1980) that levels of savings and investment are highly correlated across countries, suggesting that international capital mobility is less that many had previously thought.
	Fiat money	A money whose usefulness results, not from any intrinsic value or guarantee that it can be converted into gold or another currency, but only from a government's order (fiat) that it must be accepted as a means of payment.
	Fifty Years Is Enough	50 Years Is Enough.
	FII	Foreign institutional investor.
	Fill rate	See quota fill rate.
	Final good	A good that requires no further processing or transformation to be ready for use by consumers, investors, or government. Contrasts with intermediate good.
	Financial account	This is the term used in the balance of payments statistics, since sometime in the 1990s, for what used to be called the "capital account." See capital account, the "common" definition 2.
	Financial Accounting Standards Board	The private-sector organization that sets accounting standards for the United States, the Generally Accepted Accounting Principles.
	Financial asset	An asset whose value arises not from its physical embodiment (as would a building or a piece of land or capital equipment) but from a contractual relationship: stocks, bonds, bank deposits, currency, etc.
	Financial capital	The value of financial assets, as opposed to real assets such as buildings and capital equipment.
	Financial crisis	A loss of confidence in a country's currency or other financial assets causing international investors to withdraw their funds from the country.
	Financial flow	Any and all of the transactions in the financial account of the balance of payments, most importantly international borrowing and lending and acquisition across borders of financial and real assets.
	Financial instrument	A document, real or virtual, having legal force and embodying or conveying monetary value.
	Financial integration	Financial market integration
	Financial intermediary	An institution that provides indirect means for funds from those who wish to save or lend to be channeled to those who wish to invest or borrow. Examples include banks and other depository institutions, mutual funds, and some government programs.
	Financial market	A market for a financial instrument, in which buyers and sellers find each other and create or exchange financial assets. Sometimes these are organized in a particular place and/or institution, but often they exist more broadly through communication among dispersed buyers and sellers, including banks, over long distances.
	Financial market integration	Freedom of participants in the financial markets of two countries to transact on markets in both countries, thereby causing returns on comparable assets in the two countries to be equalized through arbitrage.
	Financial stability	The avoidance of financial crisis.
	Financial system	The complex of institutions, including especially banks and the government and international institutions that regulate them, that facilitate payments and link lenders with borrowers and investors with the assets they invest in. Increasingly, separate national financial systems have become integrated to form a global financial system.
	Financial transaction	Most transactions -- e.g., purchases and sales of goods or property -- have a financial component: payment. However, this term usually means a transaction that is only financial, such as the act of borrowing, depositing funds in a bank account, purchasing a contract on a forward market, etc.
	Financial transparency	This, according to the SEC, means "means timely, meaningful and reliable disclosures about a company's financial performance." It is a crucial requirement for informed investment in companies. It is also necessary for exposing, and therefore preventing, bribery and other forms of corruption.
	FIR	Factor intensity reversal.
	Firm	An organization, possibly as small as a single person or as large as many thousands, that produces a good and/or provides a service that it sells to the public, the government, or other firms, using the proceeds to cover its costs. Also a business, a company, or an enterprise.
	First best	See second best.
	First degree homogeneous	Homogeneous of degree 1.
	First mover advantage	The advantage that a firm or country may derive from being the first to enter a market, or from being the first to use a new technology, advertising technique, etc.
	First order condition	One of the mathematical necessary conditions for maximization, used routinely in solving economic models. Typically, it consists of setting equal to zero the derivative of the function being maximized (or its Lagrangian) with respect to a variable that can be controlled.
	First theorem of welfare economics	The proposition of welfare economics that a competitive general equilibrium is Pareto optimal. A corollary is that free trade is Pareto optimal among countries.
	Fiscal crisis	This occurs when a unit of government runs a fiscal deficit and is unable to borrow to finance it. For a national government this is most likely due to a large accumulated debt together with doubts about its ability or willingness to service that debt.
	Fiscal deficit	A deficit in the government budget of a country. Thus the budget deficit.
	Fiscal discipline	Management of the government budget so as to avoid excessive fiscal deficits. Thus restraint of government spending and/or willingness to tax.
	Fiscal policy	Any macroeconomic policy involving the levels of government purchases, transfers, or taxes, usually implicitly focused on domestic goods, residents, or firms.
	Fiscal stimulus	A tax cut and/or an increase in government spending. So called because it tends to increase aggregate demand and therefore the level of economic activity in the short run.
	Fisher Effect	The theory that a change in the expected rate of inflation will lead to an equal change in the nominal interest rate, thus keeping the real interest rate unchanged. Due to Fisher (1930).
	Fixed cost	The cost that a firm bears if it produces at all and that is independent of its output. The presence of a fixed cost tends to imply increasing returns to scale. Contrasts with variable cost.
	Fixed exchange rate	Usually synonymous with a pegged exchange rate. Although "fixed" seems to imply less likelihood of change, in practice countries seldom if ever achieve a truly fixed rate.
	Fixed factor	A factor of production the quantity of which cannot be changed. This is usually the case only in the short run.
	Flexible exchange rate	Same as floating exchange rate.
	Flexible price model	Most microeconomic models and models of international trade assume that prices adjust flexibly so as to achieve equilibrium in all markets. In contrast, some macroeconomic models assume that some prices are sticky.
	Floating exchange rate	A regime in which a country's exchange rate is allowed to fluctuate freely and be determined without intervention in the exchange market by the government or central bank.
	Floor	See price floor.
	Flow	A flow, or flow variable, is an economic magnitude describing behavior that occurs over time and is therefore meaningful only relative to the unit of time. Examples are the value of exports (dollars per year), demand for foreign exchange (euros per day), and migration (persons per month). Contrasts with a stock.
	Fluctuate	To move up and down.
	Fluctuating exchange rate	Same as flexible or floating exchange rate.
	Flying Geese	The Flying Geese model (or paradigm) of economic development depicts changing patterns of comparative advantage and trade as developing countries follow more advanced countries from which they acquire technologies through trade and investment. The name derives from a graph of Akamatsu (1961), (but 1937 in Japanese) that resembles a formation of flying geese. The graph shows paths over time of a developing country's imports, production, and exports of a product, similar to the product cycle.
	FMI	Fondo Monetario Internacional (Spanish for International Monetary Fund
	FOB	The price of a traded good excluding transport cost. It stands for "free on board," but is used only as these initials (usually lower case: f.o.b.). It means the price after loading onto a ship but before shipping, thus not including transportation, insurance, and other costs needed to get a good from one country to another. Contrasts with CIF and FAS.
	FOC	First order condition.
	FOGS Negotiations	In the Uruguay Round, this portion of the negotiations dealt with the Functioning of the GATT System and resulted ultimately in the formation of the WTO and its dispute settlement mechanism.
	Food and Agriculture Organization of the United Nations	A UN body whose purpose is to "defeat hunger" throughout the world mostly by sharing information and expertise.
	Food security	1. The reliable availability of a sufficient quantity and quality of nutritious food for a population.
	Food security	2. As used by some NGOs, the term also requires that localities or regions be self sufficient, in apparent ignorance of the impossibility of combining this with the first definition.
	Footloose factor	A factor that can move easily across national borders, in contrast to one that, due to inclination or constraints, cannot. Footloose factors are sometimes thought to have an advantage in a globalized economy.
	Footloose industry	An industry that is not tied to any particular location or country, and can relocate across national borders in response to changing economic conditions. Many manufacturing industries seem to have this characteristic.
	Forced labor	The use of labor that is compelled to work, subject to physical punishment if it does not.
	Foreign Affiliates Trade in Services	Exports and imports of services by domestically located affiliates of foreign firms.
	Foreign asset position	The amount of assets that residents of a country own abroad. Also used to mean the net foreign asset position.
	Foreign Corrupt Practices Act	U.S. law, enacted 1977, that prohibits U.S. firms from bribing foreign officials to obtain or retain business. The law permits, however, facilitating payments.
	Foreign debt	The amount a country owes to foreigners. More precisely, the negative of the net foreign asset position.
	Foreign direct investment	Acquisition or construction of physical capital by a firm from one (source) country in another (host) country. The term sometimes refers to the flow per unit time, sometimes to the accumulated stock.
	Foreign exchange	Foreign currency; any currency other than a country's own.
	Foreign exchange market	The exchange market.
	Foreign exchange rate	The exchange rate.
	Foreign exchange reserves	International reserves
	Foreign exchange risk	Exchange risk.
	Foreign institutional investor	An institutional investor based in another country. Some countries place upper limits on the share of a domestic company that an FII can own.
	Foreign investment argument for protection	The use of protection to attract FDI from abroad. It does work, since much FDI has been motivated by firms trying to get behind a tariff wall to sell their products. In an otherwise nondistorted economy, however, the cost in terms of more expensive goods is higher than the benefit from additional capital.
	Foreign portfolio investment	Portfolio investment across national borders and/or across currencies.
	Foreign repercussion	The feedback effect on a domestic economy when its macroeconomic changes cause large enough changes abroad for those in turn to cause further changes at home. Most commonly, a rise in income stimulates imports, causing an expansion abroad that in turn raises demand for the home country's exports.
	Foreign reserves	International reserves
	Foreign reserves crisis	The financial crisis that results from (or causes) a central bank coming close to running out of international reserves.
	Foreign Sales Corporation	Refers to a provision of the U.S. tax code that grants income-tax rebates to American exporters if they form what may be a largely artificial foreign subsidiary called an FSC. This has been the subject of a trade dispute with the EU, which complained to the WTO that this constitutes an illegal export subsidy.
	Foreign sector	This term seems to be used in many ways, including the following:
	Foreign sector	1. The portion of an economy or an economic model that includes exports and imports, and perhaps other international transactions.
	Foreign sector	2. The portion of an economy that is owned by foreigners.
	Foreign sector	3. The rest of the world, outside of the country being considered.
	Foreign sector	4. In the accounts of a country, all those involving international transactions.
	Foreign trade	Trade (definition #3)
	Foreign trade deficit	Trade deficit
	Foreign trade zone	An area within a country where imported goods can be stored or processed without being subject to import duty. Also called a "free zone," "free port," or "bonded warehouse."
	Forfaiting	The purchase of an exporter's receivables -- the amounts owed by importers to whom goods have already been delivered -- at a discount by a specialized financing firm or a department of a bank. This is one method of trade finance.
	Formula approach	A procedure for organizing multilateral trade negotiations using a formula for tariff reductions as a starting point.
	Forward	On the forward market.
	Forward contract	A binding commitment to buy or sell currency on a forward market.
	Forward curve	In a forward market, the pattern of forward rates, or forward premia, over various time horizons.
	Forward discount	Opposite of forward premium.
	Forward integration	Acquisition by a firm of a larger part of its distribution chain, moving it closer to selling directly to its ultimate customers.
	Forward linkage	The provision by one firm or industry of produced inputs to another firm or industry.
	Forward market	A market for exchange of currencies in the future. Participants in a forward market enter into a contract to exchange currencies, not today, but at a specified date in the future, typically 30, 60, or 90 days from now, and at a price (forward exchange rate) that is agreed upon today.
	Forward premium	The difference between a forward exchange rate and the spot exchange rate, expressed as an annualized percentage return on buying foreign currency spot and selling it forward.
	Forward price	In any forward market, the price of the item being traded for delivery at a future date; in exchange markets, the forward rate.
	Forward rate	Also called the forward exchange rate, this is the exchange rate on a forward market transaction.
	Four-firm concentration ratio	See concentration ratio.
	Four Tigers	The four Asian economies that were the first to show rapid economic development after the success of Japan: Hong Kong, South Korea, Singapore, and Taiwan.
	FPE	Factor price equalization.
	Fragmentation	The splitting of production processes into separate parts that can be done in different locations, including in different countries. One of many terms for the same phenomenon, this particular one (which I seem to favor) originated with Jones and Kierzkowski (1990).
	Free at frontier	Refers to the value of an imported product at the moment that it falls under the customs jurisdiction of the importing country. Does not include any customs duty. [Unclear, to me, how this differs from c.i.f..]
	Free capital markets	This is not a standard term, but it seems to be used, variously, to describe the absence of government regulation of international capital flows, the absence of government or central bank intervention in exchange markets, and the absence of interference with national financial and development policies by international financial institutions.
	Free carrier	A term, abbreviated FCA, denoting that a good for export to a buyer is to be delivered to a carrier specified by the buyer.
	Free enterprise	A system in which economic agents are free to own property and engage in commercial transactions. See laissez faire, economic freedom, .
	Free entry	The assumption that new firms are permitted to enter an industry and can do so costlessly. Together with free exit, it implies that profit must be zero in equilibrium.
	Free exit	The assumption that firms are permitted to leave an industry and can do so costlessly. See free entry.
	Free-floating exchange rate	Floating exchange rate. Contrasts with a managed float.
	Free list	A list of goods that a country has designated as able to be imported without being subject to tariff or import licensing.
	Free market	A market that is not interfered with by government constraints on transactions. Most would say, however, that a market that is subject to a modest and transparent tax can still be considered free.
	Free on board	See FOB.
	Free port	See foreign trade zone.
	Free rider	Someone who enjoys the benefits of a public good without bearing the cost. An example, in trade policy, is that trade liberalization benefits the majority of consumers without their lobbying for it. This may tip policy in the direction of protection, for which there are fewer free riders.
	Free trade	A situation in which there are no artificial barriers to trade, such as tariffs and NTBs. Usually used, often only implicitly, with frictionless trade, so that it implies that there are no barriers to trade of any kind. For a traded homogeneous product, it follows that domestic and world price must be equal.
	Free trade agreement	A negotiated treaty among two or more countries to form a free trade area.
	Free trade area	A group of countries that adopt free trade (zero tariffs and no other policy restrictions) on trade among themselves, while not necessarily changing the barriers that each member country has on trade with the countries outside the group.
	Free Trade Area of the Americas	A preferential trading arrangement being negotiated among most of the countries (all but Cuba) of the western hemisphere.
	Free trade association	Free Trade Area.
	Free trade zone	An export processing zone.
	Free zone	See foreign trade zone.
	Frequency	The speed of the up and down movements of a fluctuating economic variable; that is, the number of times per unit of time that the variable completes a cycle of up and down movement. See destabilizing speculation.
	Frequency ratio	A measure of the presence of nontariff barriers, defined as the percentage of a country's tariff lines that are subject to one or a group of NTBs. Contrasts with coverage ratio and tariff equivalent.
	Frictional unemployment	Unemployment of people who are changing jobs, careers, or locations.
	Frictionless trade	The absence of natural barriers to trade, such as transport costs.
	Friedman rule	The rule for the optimal conduct of monetary policy proposed by Friedman (1969), that it should generate a rate of deflation that makes the nominal interest rate equal to zero.
	Friend	See natural friend.
	Friends and enemies version	A weak version of the Stolper-Samuelson Theorem, involving natural friends and enemies, that holds with multiple goods and factors.
	FSC	Foreign Sales Corporation
	FTA	Free trade area or free trade agreement
	FTAA	Free Trade Area of the Americas
	FTZ	Free trade zone
	Functional distribution of income	How the income of an economy is divided among the owners of different factors of production, into wages, rents, etc.
	Fundamental equilibrium exchange rate	This seems to mean the same as equilibrium exchange rate. Adding "fundamental" does not seem to remove its ambiguity.
	Futures contract	A binding commitment to buy or sell a commidity or currency on a futures market.
	Futures market	A market for exchange (of currencies, in the case of the exchange market) in the future. That is, participants contract to exchange currencies, not today, but at a specified calendar date in the future, and at a price (exchange rate) that is agreed upon today.
	G-6	1. The six largest countries of the world: Canada, France, Germany, Japan, the United Kingdom, and the United States.
	G-6	2. The six largest countries of the European Union, ministers from which sometimes meet to discuss issues of common concern. The countries are France, Germany, Italy, Poland, Spain, and the United Kingdom.
	G-6	3. A group of countries that has met several times to resolve disagreements that prevent progress in the Doha Round. The group includes Australia, India, Japan, the United States, the European Union, and either Brazil or China (I've seen both mentioned).
	G-7	A group of seven major industrialized countries whose heads of state have met annually since 1976 in summit meetings to discuss economic and political issues. The seven are United States, Canada, Japan, Britain, France, Germany, and Italy (plus the EU).
	G-8	The G-7 plus Russia, which have met as a full economic and political summit since 1998.
	G-10	Group of Ten.
	G-20	1. An international forum of finance ministers and central bank governors from 19 countries and the EU, plus the IMF and World Bank. Created in 1999 by the finance ministers of the G-7, it meets annually to discuss financial and economic concerns among industrialized economies and emerging markets.
	G-20	2. A group of developing countries established Aug. 20, 2003 that joined together in the Cancún Ministerial of the WTO's Doha Round in order to negotiate collectively with the U.S. and E.U., especially seeking the elimination of developed-country agricultural subsidies. Membership in the group has fluctuated, but the name G-20 now seems to have stuck. The group has been led by Brazil, other important members including Argentina, China, India, and South Africa.
	G-24	A group of developing countries established in 1971 with the aim of taking positions on monetary and development finance issues.
	G-77	A coalition of developing countries within the United Nations, established in 1964 at the end of the first session of UNCTAD, intended to articulate and promote the collective economic interests of its members and enhance their negotiating capacity. Originally with 77 members, it now (in 2007) has 130.
	GAAP	Generally Accepted Accounting Principles
	GAFTA	Greater Arab Free Trade Area
	Gains from trade	The net benefits that countries experience as a result of lowering import tariffs and otherwise liberalizing trade.
	Gains from trade theorem	The theoretical proposition that (in the absence of distortions) there will be gains from trade for any economy that moves from autarky to free trade, as well as for a small open economy and for the world as a whole if tariffs are reduced appropriately. Due to Samuelson (1939, 1962).
	Game	A theoretical construct in game theory in which players select actions or strategies and the payoffs depend on the actions or strategies of all players.
	Game theory	The modeling of strategic interactions among agents, used in economic models where the numbers of interacting agents (firms, governments, etc.) are small enough that each has a perceptible influence on the others.
	Gastarbeiter	Guest worker.
	GATS	General Agreement on Trade in Services
	GATT	General Agreement on Tariffs and Trade
	GATT Articles	The individual sections of the GATT agreement, conventionally identified by their Roman numerals. Most were originally drafted in 1947, but are still included in the WTO.
	GATT-Speak	Variation on GATT-think.
	GATT-Think	A somewhat derogatory term for the language of GATT negotiations, in which exports are good, imports are bad, and a reduction in a barrier to imports is a concession. Similar to mercantilism. Due to Krugman (1991b).
	GCC	Gulf Cooperation Council
	GDP	Gross domestic product.
	GDP deflator	The deflator for GDP, thus the ratio of nominal GDP to real GDP (usually multiplied, as with a price index, by 100).
	GDP per capita	GDP divided by population.
	Geese	See Flying Geese.
	General Agreement on Tariffs and Trade	A multilateral treaty entered into in 1948 by the intended members of the International Trade Organization, the purpose of which was to implement many of the rules and negotiated tariff reductions that would be overseen by the ITO. With the failure of the ITO to be approved, the GATT became the principal institution regulating trade policy until it was incorporated into the WTO in 1995.
	General Agreement on Trade in Services	The agreement, negotiated in the Uruguay Round, that brings international trade in services into the WTO. It provides for countries to provide national treatment to foreign service providers and for them to select and negotiate the service sectors to be covered under GATS.
	General equilibrium	Equality of supply and demand in all markets of an economy simultaneously. The number of markets does not have to be large. The simplest Ricardian model has markets only for two goods and one factor, labor, but this is a general equilibrium model. Contrasts with partial equilibrium.
	Generalized System of Preferences	Tariff preferences for developing countries, by which developed countries let certain manufactured and semi-manufactured imports from developing countries enter at lower tariffs than the same products from developed countries.
	Generally Accepted Accounting Principles	The accounting principles set by the Financial Accounting Standards Board and required for use by United States companies. Contrasts with International Financial Reporting Standards used in Europe and other countries.
	Genetically modified organism	Plants or animals (or products thereof) whose genetic makeup has been determined or altered by genetic engineering. Trade in GMOs has been the source of disagreement and controversy between the US and the EU.
	Geneva Ministerial	The second ministerial meeting of the World Trade Organization, held in Geneva, Switzerland, May 18-20, 1998. It did not do much.
	Geneva Round	The first (1947) and fourth (1955-56) of the trade rounds conducted under the auspices of the GATT.
	Geographical indication	A label identifying where a product was produced or grown, and implying characteristics or quality particular to that location. Use of such labels by producers from other countries, has increasingly been the subject of international dispute.
	Geography	See New Economic Geography.
	GEP	Global Economic Prospects.
	GI	Geographical indication
	Giffen good	A good that is so inferior and so heavily consumed at low incomes that the demand for it rises when its price rises. The reason is that the price increase lowers income sufficiently that the positive income effect (because it is inferior) outweighs the negative substitution effect.
	Gini Coefficient	A measure of income inequality within a population, ranging from zero for complete equality, to one if one person has all the income. It is defined as the area between the Lorenz Curve and the diagonal, divided by the total area under the diagonal.
	Global competitiveness	Competitiveness, applied internationally.
	Global Economic Prospects	An annual publication of the World Bank.
	Global optimum	An allocation that is better, by some criterion, than all others possible; optimum optimorum.
	Global quota	An import quota that specifies the permitted quantity of imports from all sources combined. This may be without regard to country of origin, and thus available on a first-come-first-served basis, or it may be allocated to specific suppliers.
	Global Trade Analysis Project	A project based at Purdue University, providing a data base and CGE modeling tools for analysis of global trade.
	Globalization	1. The increasing world-wide integration of markets for goods, services and capital that began to attract special attention in the late 1990s.
	Globalization	2. Also used to encompass a variety of other changes that were perceived to occur at about the same time, such as an increased role for large corporations (MNCs) in the world economy and increased intervention into domestic policies and affairs by international institutions such as the IMF, WTO, and World Bank.
	Globalization	3. Among countries other than the United States, especially developing countries, the term sometimes refers to the domination of world economic affairs and commerce by the United States.
	GMO	Genetically modified organism.
	Gnomes of Zurich	Term used by the British Labor government to refer to Swiss bankers and financiers who engaged in currency speculation that forced the devaluation of the British pound in 1964.
	GNP	Gross national product.
	Gold Exchange Standard	A monetary system that sought to restore features of the Gold Standard in the 1920s and again in the Bretton Woods System, while economizing on gold. Instead of money being backed directly by gold, central banks issued liabilities against foreign currency assets (mostly U.S. dollars under Bretton Woods) that were in turn backed by gold.
	Gold Standard	A monetary system in which both the value of a unit of the currency and the quantity of it in circulation are specified in terms of gold. If two currencies are both on the gold standard, then the exchange rate between them is approximately determined by their two prices in terms of gold.
	Gold tranche	See tranche.
	Good	A product that can be produced, bought, and sold, and that has a physical identity. Sometimes said, inaccurately, to be anything that "can be dropped on your foot" or, also inaccurately, to be "visible." Contrasts with service. Trade in goods is much easier to measure than trade in services, and thus much more thoroughly documented and analyzed.
	Government budget	1. An itemized accounting of the payments received by government (taxes and other fees) and the payments made by government (purchases and transfer payments).
	Government budget	2. The net inflow (surplus) or outflow (deficit) of these payments.
	Government debt	The amount that a country's government has borrowed as a result of budget deficits, usually by issuing government bonds or, in developing countries, from international financial institutions. Often called the national debt.
	Government procurement	Purchase of goods and services by government and by state-owned enterprises. Transparency in government procurement is one of the Singapore Issues.
	Government procurement practice	The methods by which units of government and state-owned enterprises determine from whom to purchase goods and services. When these methods include a preference for domestic firms, they constitute an NTB. Subject of a Tokyo Round Code, and later a WTO plurilateral agreement.
	Government regulation	Includes all of the government-imposed restrictions on, and requirements of, people, firms, and organizations in a country, including on foreign people and firms that travel or engage in business there. Regulation of the latter, especially, can constitute nontariff barriers to trade in goods and services.
	GPI	Gross progress indicator
	Graduation	Termination of a country's eligibility for GSP tariff preferences on the grounds that it has progressed sufficiently, in terms of per capita income or another measure, that it is no longer in need to special and differential treatment.
	Grandfather clause	A provision in an agreement, including the GATT but not the WTO, that allows signatories to keep certain of their previously existing laws that otherwise would violate the agreement.
	Gravity equation	An estimated equation of the gravity model.
	Gravity model	A model of the flows of bilateral trade based on analogy with the law of gravity in physics: Tij = AYiYj /Dij , where Tij is exports from country i to country j, Yi,Yj are their national incomes, Dij is the distance between them, and A is a constant. Other constants as exponents and other variables are often included. Due independently to Tinbergen (1962) and Pöyhönen (1963).
	Gray area measure	A policy or practice whose conformity with existing rules in unclear, such as a VER under the GATT prior to the WTO.
	Gray market	Refers to goods that are sold for a price lower than, or through a distributor different than, that intended by the manufacturer. Most commonly, goods that are intended by their manufacturer for one national market that are bought there, exported, and sold in another national market. See parallel imports.
	Grease payment	Same as facilitating payment.
	Greater Arab Free Trade Area	A pact by members of the Arab League aimed at establishing a free trade area.
	Green box	Category of subsidies permitted under the WTO Agriculture Agreement; includes those not directed at particular products, direct income support for farmers unrelated to production or prices, subsidies for environmental protection and regional development. See box.
	Green exchange rate	An exchange rate used within the EU's Common Agricultural Policy to convert subsidy and support payments into local currencies, avoiding the variability of the rate set in the exchange market.
	Green field investment	FDI that involves construction of a new plant, rather then the purchase of an existing plant or firm. Contrasts with brown field investment.
	Green room group	A group of GATT/WTO member countries or their delegates -- including the larger members and selected smaller and less developed ones -- that have met together during negotiations (originally in a green room at WTO Geneva headquarters) to agree among themselves, before taking decisions to the full membership for the required consensus.
	Gresham's Law	The proposition that "bad money drives out good." It means that if two moneys have equal value in exchange, perhaps by fiat, but different values for other purposes (as when melted down), then the more valuable money will disappear from circulation, perhaps by leaving the country. Named for Sir Thomas Gresham (1519-1579).
	Gross	Before deduction. Contrasts with net. Just what is deducted to get from gross to net depends on the context.
	Gross domestic investment	The additions to the capital stock located within the country, without any deductions for depreciation of capital that had been previously produced.
	Gross domestic product	The total value of new goods and services produced in a given year within the borders of a country, regardless of by whom. It is "gross" in the sense that it does not, in contrast to NDP, deduct depreciation of previously produced capital.
	Gross international reserves	International reserves, without any deduction for the fact that some of them may have been borrowed. Contrasts with net international reserves.
	Gross national income	National income plus capital consumption allowance.
	Gross national product	The total value of new goods and services produced in a given year by a country's domestically owned factors of production, regardless of where. It is "gross" in the sense that, in contrast to NNP, it does not deduct depreciation of previously produced capital.
	Gross output	The total output of a firm, industry, or economy without deducting intermediate inputs. For a firm or industry, this is larger than its value added which is net of its own intermediate inputs. For an economy, gross output is greater than net output, which deducts the amount of the good itself used as an intermediate input.
	Gross progress indicator	An alternative to gross domestic product that is intended to take account of costs that are not internalized by economic agents, such as crime and pollution.
	Gross substitutes	Two goods are gross substitutes if a rise in the price of one causes and increase in demand for the other.
	Group of Seven (or Eight)	G-7 (or G-8)
	Group of Seventy Seven	G-77.
	Group of Ten	A group of ten countries, members of the IMF, that together with Switzerland agreed to make resources available outside their IMF quotas. Since 1963 the governors of the G10 central banks have met on the occasion of the bimonthly BIS meetings.
	Growth	See economic growth.
	Growth accounting	Decomposition of the sources of economic growth into the contributions from increases in capital, labor, and other factors. What remains, called the Solow residual, is usually attributed to technology.
	Growth model	A model of an economy in which quantities of factors can expand over time. The model on which most others are based is the Solow Model.
	Growth regression	The attempt to ascertain the causes of economic growth by regression of country growth rates on country characteristics. The main pitfall is that many characteristics may themselves have been altered by growth, making causation ambiguous.
	Grubel-Lloyd index	The measure of the intra-industry trade suggested by Grubel and Lloyd (1975). For an industry i with exports Xi and imports Mi the index is I = [(Xi+Mi) - \|Xi- Mi\|]100/(Xi+Mi). This is the fraction of total trade in the industry, Xi+Mi, that is accounted for by IIT (times 100).
	GSP	Generalized System of Preferences
	GSP social clause	See social clause.
	GTAP	Global Trade Analysis Project
	Guest worker	A foreign worker who is permitted to enter a country temporarily in order to take a job for which there is shortage of domestic labor.
	Gulf Cooperation Council	An agreement among six countries of the Persian Gulf region in 1981 with the aim of coordinating and integrating their economic policies.
	Harberger-Laursen-Metzler Effect	The conjecture or result that a terms of trade deterioration will cause a decrease in savings due to the decrease in real income, and therefore that a real depreciation will cause an increase in real expenditure. Due to Harberger (1950) and Laursen and Metzler (1950).
	Harberger triangle	The triangular area, or areas, in a supply and demand diagram that measures the net welfare loss, or dead-weight loss due to a market distortion or policy, such as a tariff.
	Hard currency	A currency that is widely accepted around the world, usually because it is the currency of a country with a large and stable market. Examples today include the U.S. dollar and the euro.
	Hard peg	A pegged exchange rate with a credible commitment never to change the par value, thus subordinating monetary policy to the needs of the exchange market and denying access to devaluation as a policy tool. In practice, the effects of a hard peg are achieved only through a currency board or by adopting another country's currency, e.g. dollarization.
	Harkin bill	The Child Labor Deterrence Act, introduced into the US Senate by Iowa Senator Tom Harkin several times from 1992 through 1999 but never passed into law.
	Harmful externality	Negative externality.
	Harmonization	1. The changing of government regulations and practices, as a result of an international agreement, to make those of different countries the same or more compatible.
	Harmonization	2. In the case of tariffs, this means making tariff rates more similar across industries and/or across countries.
	Harmonized System	An international system for classifying goods in international trade and for specifying the tariffs on those goods. It was adopted at the beginning of 1989, replacing the previously used schedules in over 50 countries, including the Brussels Tariff Nomenclature.
	Harrod neutral	A particular specification of technological change or technological difference that is labor augmenting.
	Hat algebra	The Jones (1965) technique for comparative static analysis in trade models. By totally differentiating a model in the logarithms of its variables, a linear system is obtained relating small proportional changes (denoted by carats (^), or "hats") in terms of various elasticities and shares. (The published article used *, not ^, because of typographical constraints.)
	Havana Charter	The charter for the never-implemented International Trade Organization. The draft was completed at a conference in Havana, Cuba, in 1948.
	HDI	Human Development Index
	Headcount index	A common measure of poverty, defined as the percentage of the population living below the poverty line.
	Headline inflation	The rate of inflation that attempts to include everything that contributes to the cost of living. Contrasts with core inflation, which excludes prices of food and energy.
	Headquarters services	The activities of a firm that typically occur at its main location and that contribute in a broad sense to its productivity at all of its locations and plants. These may include management, accounting, marketing, and R&D.
	Heavily indebted poor countries	The name given to those poor countries with large debts, the target of initiatives to forgive that debt as a means of assisting development.
	Heckscher-Ohlin Core Propositions	See core propositions.
	Heckscher-Ohlin Model	A model of international trade in which comparative advantage derives from differences in relative factor endowments across countries and differences in relative factor intensities across industries. Sometimes refers only to the textbook or 2x2x2 model, but more generally includes models with any numbers of factors, goods, and countries. Model was originally formulated by Heckscher (1919), fleshed out by Ohlin (1933), and refined by Samuelson (1948, 1949, 1953).
	Heckscher-Ohlin-Samuelson Model	Usually synonymous with the Heckscher-Ohlin Model, although sometimes the term is used to distinguish the more formalized, mathematical version that Samuelson used from the more general but less well-defined conceptual treatment of Heckscher and Ohlin.
	Heckscher-Ohlin Theorem	The proposition of the Heckscher-Ohlin Model that countries will have comparative advantage in, and therefore export, the goods that use relatively intensively their relatively abundant factors.
	Heckscher-Ohlin-Vanek Model	The Heckscher-Ohlin Model for the case of identical techniques of production (due either to FPE or Leontief technologies), used to derive the strong prediction about the factor content of trade known as the Heckscher-Ohlin-Vanek Theorem.
	Heckscher-Ohlin-Vanek Theorem	The prediction of the H-O-V Model that a country's net factor content of trade equals its own factor endowment minus its world-expenditure share of the world factor endowment. That is, for country i, Fi = Vi – siVW, where Fi is the factor content of its trade, Vi,VW its and the world's factor endowments, and si its share of world expenditure. Due to Vanek (1968).
	Hedge	To offset risk. In the foreign exchange market, hedgers use the forward market to cover a transaction or open position and thereby reduce exchange risk. The term applies most commonly to trade.
	Hedonic pricing	The use of statistical techniques such as regression analysis to determine, from the prices of goods with different measurable characteristics, the prices that are associated with those characteristics. The latter can then be used to construct what the comparable price of a good would be from its characteristics.
	Helms-Burton Act	A United States law enacted in 1996 that penalized companies for doing business in Cuba. Since the law applied to non-U.S. companies as well as U.S. companies, other governments objected.
	Herfindahl index	A standard measure of industry concentration, defined as the sum of the squares of the market shares (in percentages) of the firms in the industry.
	Heterogeneous	Not all the same. Not homogeneous.
	Heterogeneous firm model	An economic model in which firms in an industry are not all the same, as for example a Melitz model.
	Hicks-Kaldor improvement	Potential Pareto improvement
	Hicks-neutral	Said of a technological change or technological difference if production functions differ by scaling of output only: F2(V)=lF1(V), where F1(·) and F2(·) are the production functions being compared, V is a vector of factor inputs, and l>0 is a constant.
	Hicksian composite unit-value isoquant	For given constant-returns-to-scale technologies for two or more goods and given prices of those goods, this is the convex hull of the unit value isoquants of those goods. It thus represents the most efficient ways of allocating factors so as to produce one unit of value by producing one or more of the goods.
	High dimension	In trade theory, this refers to having more than two goods, factors, and/or countries, or to having arbitrary numbers of these. Contrasts with the two-ness of the 2x2x2 Model.
	High powered money	Same as monetary base, in the sense of currency plus commercial bank reserves.
	HIPC	Heavily indebted poor countries.
	H-O Model	Heckscher-Ohlin Model.
	Holdup problem	In the context of a potential mutually beneficial agreement, the disincentive for one party to invest in that agreement, due to the potential for the other party to extract such benefits, after the investment, as would leave the first party at a loss. Problem arises in many contexts, including international trade that requires, say, an exporter to bear an initial fixed cost.
	Hollowing out	The shrinking of the manufacturing sector that has sometimes been thought to result from international trade or outsourcing.
	Home bias	A preference, by consumers or other demanders, for products produced in their own country compared to otherwise identical imports. This was proposed by Trefler (1995) as a possible explanation for the mystery of the missing trade.
	Home market effect	The tendency in industries with increasing returns to scale for large countries to be net exporters. Due to Krugman (1980)
	Homogeneous	1. Having the property that all constituent elements are the same, as a homogeneous good. Contrasts with heterogeneous.
	Homogeneous	2. Possessing a certain form of uniformity, as a homogeneous function.
	Homogeneous function	A function with the property that multiplying all arguments by a constant changes the value of the function by a monotonic function of that constant: F(lV)=g(l)F(V), where F(·) is the homogeneous function, V is a vector of arguments, l>0 is any constant, and g(·) is some strictly increasing positive function. Special cases include homogeneous of degree N and linearly homogeneous.
	Homogeneous good	A good all units of which are the same; a homogeneous product.
	Homogeneous of degree 1	The same as linearly homogeneous and, for a production function, constant returns to scale. See homogeneous of degree N.
	Homogeneous of degree N	A homogeneous function where the monotonic function is the constant raised to the exponent N: F(lV)=lNF(V). For N>1, see increasing returns to scale; for N<1, see decreasing returns to scale.
	Homogeneous of degree zero	The property of a function that, if you scale all arguments by the same proportion, the value of the function does not change. See homogeneous of degree N. In the H-O Model, CRTS production functions imply that marginal products have this property, which is critical for FPE.
	Homogeneous product	The product of an industry in which the outputs of different firms are indistinguishable. Contrasts with differentiated product.
	Homohypallagic	Having a constant elasticity of substitution. One of the inventors of the CES function tried to christen it this in Minhas (1962), where he also explored its theoretical and empirical implications for the Heckscher-Ohlin Theorem, but the name did not catch on.
	Homothetic	A function of two or more arguments is homothetic if all ratios of its first partial derivatives depend only on the ratios of the arguments, not their levels. For competitive consumers or producers optimizing subject to homothetic utility or production functions, this means that ratios of goods demanded depend only on relative prices, not on income or scale.
	Homothetic demand	Demand functions derived from homothetic preferences. The demand functions are not themselves literally homothetic.
	Homothetic preferences	Together with identical preferences, this assumption is used for many propositions in trade theory, in order to assure that consumers with different incomes but facing the same prices will demand goods in the same proportions.
	Homothetic tastes	Homothetic preferences.
	Hong Kong Ministerial	The 6th WTO ministerial meeting, held in Hong Kong, China, December 13-18, 2005. Intended to achieve significant progress in the negotiations for the Doha Round, it ended with only minimal progress but was nonetheless declared a success.
	Horizontal discipline	The use of a rule, as in the regulations of trade policies under the GATT or GATS, that applies across the board to all sectors of the economy.
	Horizontal FDI	Foreign direct investment by a firm to establish manufacturing facilities in multiple countries, all producing essentially the same thing but for their respective domestic or nearby markets. Contrasts with vertical FDI.
	Horizontal integration	Production of different varieties of the same product, or different products at the same level of processing, within a single firm. This may, but need not, take place in subsidiaries in different countries.
	Horizontal intraindustry trade	Intraindustry trade in which the exports and imports are at the same stage of processing. Likely due to product differentiation. Contrasts with vertical IIT.
	Hormone dispute	See beef hormone case.
	HOS Model	Heckscher-Ohlin-Samuelson Model.
	Host country	The country into which a foreign direct investment is made.
	Hostage effect	One reason why a firm might choose to acquire less than 100% of a foreign firm that it buys, in spite of the extra administrative cost of managing shared ownership: it gives the seller a stake in the acquired firm, and thus incentive to behave and communicate helpfully.
	HOT	Heckscher-Ohlin Theorem.
	Hot money	Holdings of very liquid assets, which may be sold or cashed on short notice and then removed from a country, often in response to expectations of devaluation or other financial crisis.
	HOV Model	Heckscher-Ohlin-Vanek Model.
	HS	Harmonized System
	Hub and spoke integration	A pattern of economic integration in which one country (the "hub") forms preferential trading arrangements with two or more other countries (the "spokes") that do not form such arrangements with each other.
	Human capital	1. The stock of knowledge and skill, embodied in an individual as a result of education, training, and experience, that makes him or her more productive.
	Human capital	2. The stock of knowledge and skill embodied in the population of an economy.
	Human Development Index	An index produced by UNDP for 177 countries (as of June 2008) to measure three aspects of human development: life expectancy and health; knowledge; and standard of living.
	Human rights	The conditions and expectations to which every person, by virtue of his or her existence as a human being, is entitled.
	Hyperinflation	Inflation at a very high and rising rate. Defined by Cagan (1956) to be over 50%.
	Hysteresis	1. The failure of an economic variable to return to its initial equilibrium after a temporary shock. For example, an industry or trade flow might disappear due to an exchange rate change, then not reappear after the change is reversed.
	Hysteresis	2. A time lag between a cause and an effect. (Though this seems to be the more standard dictionary definition, economists seem to prefer definition 1.)
	IADB	Inter-American Development Bank
	IASB	International Accounting Standards Board
	IBRD	International Bank for Reconstruction & Development
	ICA	International commodity agreement
	ICC	International Chamber of Commerce
	Iceberg transport cost	A cost of transporting a good that uses up only some fraction of the good itself, rather than using any other resources. Based on the idea of floating an iceberg, which is costless except for the amount of the iceberg itself that melts. It is a very tractable way of modeling transport costs since it impacts no other market. Due to Samuelson (1954).
	ICN	International Competition Network
	ICOR	Incremental capital output ratio
	ICP	International Comparison Program
	ICSID	International Centre for Settlement of Investment Disputes
	IDA	International Development Association
	IDB	Inter-American Development Bank
	Identical preferences	The assumption that individuals -- either within a country or in different countries -- have the same preferences. To be useful, since individuals' and countries' incomes may differ, the assumption is often used together with homothetic preferences.
	IFAD	International Fund for Agricultural Development
	IFRS	International Financial Reporting Standards
	IFC	International Finance Corporation
	IFI	International financial institution
	IFS	International Financial Statistics
	IIDE	Institute for International and Development Economics
	IIT	Intraindustry trade
	ILO	International Labor Organization
	Imbalance	1. Any departure from equality.
	Imbalance	2. In the balance of payments, any surplus or deficit.
	IMF	International Monetary Fund
	IMF Quota	The amount of money that each IMF member country is required to contribute to the institution, partly in their own currency and partly in U.S. dollars, gold, or other member-country currencies. A country's quota is based upon the country's GDP. Countries have voting power in the IMF in proportion to their IMF quotas.
	Immigration	The migration of people into a country.
	Immiserizing growth	Economic growth that makes the country worse off. Bhagwati (1958) coined this term for growth that expands exports and worsens the terms of trade sufficiently that real income falls. Johnson (1955) had shown that a market distorted by a tariff could lose from growth and had also, independently, worked out conditions for Bhagwati's result.
	Immiserizing transfer	A transfer that makes the receiving country worse off.
	Impairment	See nonviolation
	Imperfect capital mobility	Any departure from perfect capital mobility, permitting interest rates or returns to capital to differ between countries.
	Imperfect competition	Any departure from perfect competition. However, imperfect competition usually refers to one of the market structures other than perfect competition.
	Imperfectly competitive	Refers to an economic agent (firm or consumer), group of agents (industry), model, or analysis that is characterized by imperfect competition. Contrasts with perfectly competitive.
	Implicit price deflator	A broad measure of prices derived from separate estimates of real and nominal expenditures for GDP or a subcategory of GDP. Without qualification the term refers to the GDP deflator and is thus an index of prices for everything that a country produces, unlike the CPI, which is restricted to consumption and includes prices of imports.
	Implicit tariff	1. Tariff revenue on a good or group of goods, divided by the corresponding value of imports. Often lower than the official or statutory tariff, due both to PTAs and to failures in customs collection.
	Implicit tariff	2. The difference between the price just inside a border and the price just outside it, especially in the case of a good protected by an import quota.
	Import	1. A good that crosses into a country, across its border, for commercial purposes.
	Import	2. A product, which might be a service, that is provided to domestic residents by a foreign producer.
	Import	3. To cause a good or service to be an import under definitions 1 and/or 2.
	Import authorization	The requirement that imports be authorized by a special agency before entering a country, similar to import licensing.
	Import bias	1. Any bias in favor of importing.
	Import bias	2. Applied to growth, it tends to mean a bias against importing, and against trading more generally. Thus growth that is based disproportionately on accumulation of the factor used intensively in the import-competing industry and/or technological progress favoring that industry.
	Import-competing	Refers to an industry that competes with imports. That is, in a two-good model with trade, one good is the export good and the other is the import-competing good.
	Import demand elasticity	The elasticity of demand for imports with respect to price.
	Import deposit	A requirement that importers put some amount of money in an account for some period of time. The purpose may be to assure that import duties will be paid, if they apply (as in the case of a tourist bringing in a car), or the deposit may simply be a nontariff barrier intended to discourage imports.
	Import duty	A tariff on imports.
	Import elasticity	Usually means the import demand elasticity.
	Import-export company	A firm whose business consists mainly of international trade: buying goods in one country and selling them in another, thus both exporting and importing. Same as export-import company.
	Import liberalization	Trade liberalization
	Import license	The license to import under an import quota or under exchange controls.
	Import licensing	See licensing.
	Import monitoring	A practice introduced by the US, first for steel and later for textiles and apparel, whereby the Department of Commerce records the volume of imports of specified products in order to make these data publicly available earlier than would otherwise be possible. Implicitly, these procedures are intended to facilitate faster administered protection.
	Import parity price	The price that a purchaser pays or can expect to pay for an imported good, thus the c.i.f. import price plus tariff plus transport cost to the purchaser's location. This and the export parity price together define a range of the possible equilibrium prices for an equivalent domestically produced good.
	Import penetration	A measure of the importance of imports in the domestic economy, either by sector or overall, usually defined as the value of imports divided by the value of apparent consumption.
	Import price index	Price index of the goods that a country imports.
	Import promotion	Any policy that encourages imports. A policy of export promotion generally has the side effect of stimulating imports as well. Today the term is more commonly used for policies used by developed countries intended to assist developing countries in exporting to them.
	Import propensity	The marginal propensity to import (or sometimes the average propensity, if they are different).
	Import protection	See protection.
	Import quantity index	Quantity index of the goods that a country imports.
	Import quota	See quota.
	Import relief	Usually refers to some form of restraint of imports in a particular sector in order to assist domestic producers, and with the connotation that these producers have been suffering from competition with imports. If done formally under existing statutes, it is administered protection, but it may also be done informally using a VER.
	Import substitute	A good produced on the domestic market that competes with imports, either as a perfect substitute or as a differentiated product.
	Import substituting industrialization	A strategy for economic development based on replacing imports with domestic production. (ISI)
	Import substitution	A strategy for economic development that replaces imports with domestic production. It may be motivated by the infant industry argument, or simply by the desire to mimic the industrial structure of advanced countries. Contrasts with export promotion.
	Import surcharge	A tax levied uniformly on most or all imports, in addition to already-existing tariffs.
	Import surveillance	The monitoring of imports, usually by means of automatic licensing.
	Import tariff	Tariff
	Import tax	Tariff
	Import-weighted average tariff	See trade weighted average tariff.
	Imports	The quantity or value of all that is imported into a country.
	Impossible trinity	The impossibility of combining all three of the following: monetary independence, exchange rate stability, and full financial market integration.
	Impost	A tax or tariff. (This is not a commonly used word.)
	Improve the terms of trade	To increase the terms of trade; that is, to increase the relative price of exports compared to imports. Because it represents an increase in what the country gets in return for what it gives up, this is associated with an improvement in the country's welfare, although whether that actually occurs depends on the reason prices change.
	Improve the trade balance	This conventionally refers to an increase in exports relative to imports, which thus causes the balance of trade to become larger if positive or smaller if negative. The terminology ignores that exports drain resources while imports satisfy domestic needs, and reflects instead the association of exports with either accumulation of wealth or jobs.
	In kind	Referring to a payment made with goods instead of money.
	Incidence	See tax incidence.
	Income	1. The amount of money (nominal or real) received by a person, household, or other economic unit per unit time in return for services provided or goods sold.
	Income	2. National income.
	Income	3. The return earned on an asset per unit time.
	Income disparity	Inequality of income, usually referring to differences in average per capita incomes across countries.
	Income distribution	A description of the fractions of a population that are at various levels of income. The larger are the differences in income, the "worse" the income distribution is usually said to be, the smaller the "better." International trade and factor movements can alter countries' income distributions by changing prices of low- and high-paid factors.
	Income effect	That portion of the effect of price on quantity demanded that reflects the change in real income due to the price change. Contrasts with substitution effect.
	Income elastic	Having an income elasticity greater than one.
	Income elasticity	Normally the income elasticity of demand; that is, the elasticity of demand with respect to income.
	Income-expenditure analysis	The simplest Keynesian model for determining national income, in which desired expenditure (consumption plus investment plus government purchases) depends on income, which is in turn determined so that desired expenditure equals income. Gives rise to the income-expenditure multiplier.
	Income inelastic	Having an income elasticity less than one.
	Income redistribution argument for a tariff	The argument that tariffs should be used in order to redistribute income towards the poor. In a rich country, where unskilled labor is the scarce factor, this can make sense as explained in the Stolper-Samuelson Theorem, but it is a second-best argument.
	Incomplete information	See complete information.
	Incomplete specialization	Production of goods that compete with imports.
	Incoterms	International commercial terms; that is, the language of international commerce. Examples include CIF, ex works, and FOB. The name was coined by the International Chamber of Commerce, which maintains and updates their definitions.
	Increasing cost	1. Referring to a single firm or industry, the rise in cost of production that occurs when output is increased by expanding variable inputs while holding some fixed input constant. A corollary of the Law of Diminishing Returns.
	Increasing cost	2. In general equilibrium, increasing opportunity cost.
	Increasing opportunity cost	The characteristic of an economy that the opportunity cost of a good rises as it produces more of it, resulting in a transformation curve that is concave to the origin. In the HO Model, this happens in spite of CRTS if sectors have different factor intensities.
	Increasing returns to scale	A property of a production function such that changing all inputs by the same proportion changes output more than in proportion. Common forms include homogeneous of degree greater than one and production with constant marginal cost but positive fixed cost. Also called economies of scale, scale economies, and simply increasing returns. Contrasts with decreasing returns and constant returns.
	Incremental capital output ratio	The amount of additional capital that a developing country requires to increase its output by one unit; thus the reciprocal of the marginal product of capital. Used as an (inverse) indicator of how efficiently a country is using the scarce capital it acquires.
	Indebtedness	The amount that is owed; thus amount of an entity's (individual, firm, or government's) financial obligations to creditors.
	Index	A quantitative measure, usually of something the measurement of which is not straightforward, such as an average of many diverse prices, or a concept such as economic development or human rights.
	Index number	A numerical index, usually indicating, by comparison with a base value of 100, the size of the index relative to a base year or other benchmark for comparison. Thus, for example, a CPI of 115 in 2004 with a base year of 1999 means that prices have risen 15% from 1999 to 2004.
	Index number problem	A question the answer to which depends on a choice of weights. E.g., the effect of trade on the real wage of labor in the specific factors model is an index number problem, depending on how much workers consume of (lower-priced) imported and (higher-priced) exported goods.
	Index of openness	Openness index
	Index of sustainable economic welfare	An alternative to GDP intended as a measure of welfare rather than simply production. As such it would take account of such things as income distribution, environmental impact, and leisure. No single measure of ISEW seems to have been agreed upon.
	Indifference curve	A means of representing the preferences and well being of consumers. Formally, it is a curve representing the combinations of arguments in a utility function that yield a given level of utility.
	Indirect exchange rate	The foreign-currency price of a unit of domestic currency. (This definition appears in several places, but it is a mystery to me why this is any less direct than its reciprocal.)
	Industrial concentration	The extent to which a small number of firms dominates an industry, often measured by a concentration ratio or by a Herfindahl index. Concentration is, in effect, the opposite of competition, although in an open economy imports complicate the relationship.
	Industrial policy	Government policy to influence which industries expand and, perhaps implicitly, which contract, via subsidies, tax breaks, and other aids for favored industries. The purpose, aside from political favor, may be to foster competitive advantage where there are beneficial externalities and/or scale economies.
	Industrialization	The establishment and subsequent growth of industrial production in a country, usually meaning heavy manufacturing.
	Industrialized	Having experienced substantial industrialization. Industrialized countries are usually the same as developed countries.
	Industry	1. The portion of an economy that produces a particular related group of products; e.g., the motor vehicle industry, the tourism industry, the mining industry. A list of industries might well include agriculture.
	Industry	2. One of three main sectors of an economy, the other two being the agriculture and service sectors. Industry in turn includes mining and manufacturing.
	Inelastic	Having an elasticity less than one. For a price elasticity of demand, this means that expenditure falls as price falls. For an income elasticity it means that expenditure share falls with rising income. Contrasts with elastic and unit elastic.
	Inelastic offer curve	An offer curve with inelastic demand for imports. That inelasticity implies that exports decline as imports increase, and it therefore means that the offer curve is backward bending. Strictly speaking, the natural definition of an offer curve's elasticity would be negative in this case, not just less than one, but that definition is seldom used.
	Inequality	Differences in per capita income or household income across populations within a country or across countries.
	Infant industry argument	The theoretical rationale for infant industry protection.
	Infant industry protection	Protection of a newly established domestic industry that is less productive than foreign producers. If productivity will rise with experience enough to pass Mill's and Bastable's tests, there is a second-best argument for protection. The term is very old, but a classic treatment may be found in Baldwin (1969).
	Inferior good	A good the demand for which falls as income rises. The income elasticity of demand is therefore negative.
	Inflation	Increase in the overall price level of an economy, usually as measured by the CPI or by the implicit price deflator.
	Inflation adjusted	Adjusted for inflation.
	Inflation rate	The percentage increase in the price level per year. See inflation.
	Inflation targeting	A principle of monetary policy that the rate of inflation should be kept within a pre-specified range, using expansionary policy when the rate is below that range and contractionary policy above it.
	Inflow	See capital inflow.
	Inframarginal	Inside of, as opposed to at, the margin. Example: for a firm that is producing 100 units, marginal cost is the cost of the 101st unit, while inframarginal cost is the cost of units 1,...,100.
	Inframarginal rent	The quasi rent earned by a perfectly competitive firm in the short run. If price equals marginal cost, then it earns nothing on the marginal unit, but if marginal cost increases with output due to a fixed factor, then price exceeds marginal cost for inframarginal units.
	Infrastructure	The facilities that must be in place in order for a country or area to function as an economy and as a state, including the capital needed for transportation, communication, and provision of water and power, and the institutions needed for security, health, and education.
	Injury	Harm to an industry's owners and/or workers. Import protection under the safeguards, AD, and CVD provisions of the GATT require a finding of serious (for safeguards) or material (for AD/CVD) injury (as determined by, in the U.S., the ITC). Known as the injury test.
	Injury margin	In cases of anti-dumping and counterailing duties, the difference between the import price and the price that would be needed to prevent injury.
	Innovation	The creation or introduction of something new, especially a new product or a new way of producing something.
	Input	1. Anything that is used in a production process, including both the services of primary factors and intermediate inputs.
	Input	2. Sometimes input refers only to intermediate inputs, as distinct from primary factors.
	Input-output	Refers to the structure of intermediate transactions among industries, in which one industry's output is an input to another, or even to itself.
	Input-output table	A table of all inputs and outputs of an economy's industries, including intermediate transactions, primary inputs, and sales to final users. As developed by Wassily Leontief, the table can be used to calculate gross outputs and primary factor inputs needed to produce specified net outputs. Leontief (1954) used this to find the factor content of U.S. trade, generating the Leontief Paradox
	Inshoring	Term used occasionally as an opposite to offshoring, when a foreign firm relocates a part of its productive activity into the domestic economy.
	Insignificant	1. Too small to matter, usually meaning that the size of a variable or effect is small enough that it will not be noticed in comparison to whatever else is going on.
	Insignificant	2. Not statistically significant.
	Insourcing	Same as inshoring, and opposite of outsourcing.
	Instability	The property of not being stable; thus, moving around over time, and/or uncertain in its movement over time.
	Institute for International and Development Economics	A web-based network of research economists in Europe and North America focusing on the global economy, trade and financial integration, and international development.
	Institutional investor	An owner of financial assets other than a person, and for whom such ownership is a main part of its business. Main examples are banks, hedge funds, insurance companies, mutual funds, and pension funds.
	Instrument	1. An economic variable that is controlled by policy makers and can be used to influence other variables, called targets. Examples are monetary and fiscal policies used to achieve external and internal balance.
	Instrument	2. See financial instrument.
	Insurance	A financial arrangement to reduce risk. The purchaser of insurance pays a fixed amount, in return for which the seller agrees to pay some larger amount if an unlikely adverse event occurs.
	Integrated World Economy	A hypothetical, theoretical benchmark in which both goods and factors move costlessly between countries. The IWE is associated with a rectangular diagram depicting allocation of factors to countries, showing conditions for FPE. The name was coined by Dixit and Norman (1980), but the concept and technique was introduced by Travis (1964).
	Integrated World Economy diagram	A box diagram, somewhat analogous to an Edgeworth box, depicting alternative allocations of world endowments of two factors between two countries. It is used to illustrate the conditions for factor price equalization. See figure.
	Integration	Economic integration refers to reducing barriers among countries to transactions and to movements of goods, capital, and labor, including harmonization of laws, regulations, and standards. Common forms include FTAs, customs unions, and common markets. Sometimes classified as shallow integration vs. deep integration.
	Intellectual property	Products of the mind, such as inventions, works of art, music, writing, film, etc.
	Intellectual property protection	Laws that establish and maintain ownership rights to intellectual property. The principal forms of IP protection are patents, trademarks, and copyrights.
	Intellectual property right	The right to control and derive the benefits from something one has invented, discovered, or created.
	Intensity	The amount that something is used, as compared to something else. See factor intensity.
	Intensive	Of production, using a relatively large amount of an input. See factor intensity.
	Intensive margin	Refers to varying the amount of trade (or other activity) of a firm, industry, or country by varying the quantity that it trades of a given number of products, as opposed to the extensive margin at which it would vary the number of products.
	Inter-American Development Bank	A development bank for the countries of Latin America and the Caribbean.
	Interbank rate	The rate of interest charged by a bank on a loan to another bank. See LIBOR.
	Interdependence	See economic interdependence.
	Interest	The amount paid by a borrower to a lender above the amount (the principal) that has been borrowed.
	Interest arbitrage	A form of arbitrage intended to profit from a difference in interest rates in different markets. It consists of simultaneously borrowing at the low interest rate and lending at the higher interest rate in order to profit from the difference. If done in two different currencies, it may be covered or uncovered.
	Interest bearing account	An account in a bank or other financial institution that pays interest to the depositor.
	Interest equalization tax	A tax levied between 1963 and 1974 by the United States of 15% on interest received from foreign borrowers, intended to discourage capital outflows.
	Interest parity	Equality of returns on otherwise identical financial assets denominated in different currencies. May be uncovered, with returns including expected changes in exchange rates, or covered, with returns including the forward premium or discount. Also called interest rate parity and interest parity condition.
	Interest rate	The rate of return on bonds, loans, or deposits. When one speaks of "the" interest rate, it is usually in a model where there is only one.
	Interest rate parity	Interest parity
	Interindustry trade	Trade in which a country's exports and imports are in different industries. Typical of models of comparative advantage, such as the Ricardian Model and Heckscher-Ohlin Model. Contrasts with intraindustry trade.
	Intermediate good	Same as intermediate input.
	Intermediate input	An input to production that has itself been produced and that, unlike capital, is used up in production. As an input it is in contrast to a primary input and as an output it is in contrast to a final good. A very large portion of international trade is in intermediate inputs.
	Intermediate transaction	The sale of a product by one firm to another, presumably to be used as an intermediate input.
	Intermittent dumping	Dumping that occurs for short periods of time, presumably to dispose of temporary surpluses of goods and not intended to eliminate competition. Same as sporadic dumping.
	Intermodalism	The use of more than one form (mode) of transportation, as when a shipment travels by both sea and rail.
	Internal balance	A target level for domestic aggregate economic activity, such as a level of GDP that minimizes unemployment without being inflationary. See the assignment problem. Contrasts with external balance.
	Internal debt	The amount owed by a country to, in effect, itself. It includes, for example, the portion of the government debt that is denominated in the country's own currency and held by domestic residents.
	Internal economies of scale	Economies of scale that are internal to a firm; that is, the firm's average costs fall as its own output rises. Likely to be inconsistent with perfect competition. Contrasts with external economies of scale.
	Internal equilibrium	Internal balance
	Internal market	Term used for a target of European integration, which would remove all barriers between national markets so that they would become, in effect, a single European market.
	Internal rate of return	A way of quantifying the stream over time of returns on an investment relative to its cost. Defined as the interest rate at which the present value of the returns equals the cost.
	Internalization	One of the three pillars of the OLI paradigm for understanding FDI and the formation of multinational enterprises, this refers to the advantage that a firm derives from keeping multiple activities within the same organization.
	Internalize	To cause, usually by a tax or subsidy, an external cost or benefit of someone's actions to be experienced by them directly, so that they will take it into account in their decisions.
	International	Involving transactions or relations between nations. The term, according to Suganami (1978), was coined by Bentham (1789).
	International Accounting Standards Board	An independent body, based in London, that sets accounting standards in the form of the International Financial Reporting Standards.
	International adjustment process	1. Any mechanism for change in international markets.
	International adjustment process	2. The mechanism by which payments imbalances diminish under pegged exchange rates and nonsterilization. Similar to the specie flow mechanism, exchange-market intervention causes money supplies of surplus countries to expand and vice versa, leading to price and interest rate changes that correct the current and capital account imbalances.
	International Bank for Reconstruction & Development	The largest of the five institutions that comprise the World Bank Group, IBRD provides loans and development assistance to middle-income countries and creditworthy poorer countries.
	International capital movement	The acquisition or sale of assets, financial or real, across international borders. Measured in the financial account of the balance of payments.
	International cartel	See cartel.
	International Centre for Settlement of Investment Disputes	One of the five institutions that comprise the World Bank Group, ICSID provides facilities for the settlement - by conciliation or arbitration - of investment disputes between foreign investors and their host countries.
	International Chamber of Commerce	Calling itself the "voice of world business," the ICC promotes the cause of international business and open markets.
	International Cocoa Organization	An intergovernmental organization set up in 1973 to administer the International Cocoa Agreement, the most recent version of which was negotiated in 2001. See international commodity agreement.
	International Coffee Organization	An intergovernmental organization set up in 1963 that administers the International Coffee Agreement. See international commodity agreement.
	International commodity agreement	An agreement among producing and consuming countries to improve the functioning of the global market for a commodity. May be administrative, providing information, or economic, influencing world price, usually using a buffer stock to stabilize it. ICAs are overseen by UNCTAD.
	International Comparison Program	A program currently coordinated by the World Bank to gather extensive information about prices in many countries so as to ascertain the purchasing power of their currencies and thus permit international comparisons of real incomes.
	International Competition Network	A network for cooperation among the antitrust agencies of a large number of both developed and developing countries.
	International competitiveness	See competitiveness.
	International Cotton Advisory Committee	An association of governments dealing with cotton. It grew out of an International Cotton Meeting in 1939. See international commodity agreement.
	International Development Association	One of the five institutions that comprise the World Bank Group, IDA provides interest free loans and other services to the poorest countries.
	International Fund for Agricultural Development	A United Nations specialized agency that finances projects primarily for food production in developing countries.
	International economics	The study of economic interactions among countries -- including trade, investment, financial transactions, and movement of people -- and the policies and institutions that influence them.
	International exhaustion	See exhaustion.
	International externality	An externality that extends across national borders. A negative example is emission of greenhouse gases that contribute to global warming. A positive example is technological innovation that diffuses to other countries.
	International factor movement	The international movement of any factor of production, including primarily labor and capital. Thus includes migration and foreign direct investment. Also may include the movement of financial capital in the form of international borrowing and lending.
	International finance	The monetary side of international economics, in contrast to the real side, or real trade. Often called also international monetary economics or international macroeconomics, each term has a slightly different meaning, and none seems entirely right for the entire field. "International finance" is best for the study of international financial markets including exchange rates.
	International Finance Corporation	One of the five institutions that comprise the World Bank Group, IFC promotes growth in the developing world by financing private sector investments and providing technical assistance and advice to governments and businesses.
	International financial institution	Usually refers to intergovernmental organizations dealing with financial issues, most often the IMF and/or the World Bank.
	International Financial Reporting Standards	A set of accounting standards set by the International Accounting Standards Board and required for use throughout Europe and parts of Asia, Africa and Latin America. Other countries have committed to adopt or converge toward these standards, and the United States permits non-US companies to report under them, although US companies use the Generally Accepted Accounting Priciples.
	International Financial Statistics	Publication of the International Monetary Fund.
	International Fisher Effect	The theory that exchange-rate changes will match, or be expected to match, international differences in nominal interest rates. It follows from the (domestic) Fisher Effect together with purchasing power parity.
	International Grains Council	An intergovernmental organization, concerned with grains trade, that administers the Grains Trade Convention of 1995. See international commodity agreement.
	International institution	An organization established by multiple national governments, usually to administer a program or pursue a purpose that the governments have agreed upon.
	International indebtedness	The amount that a country's government and/or its private sector has borrowed from other countries and/or international financial institutions.
	International investment	1. International capital movement
	International investment	2. Foreign direct investment.
	International Jute Organization	The organization set up in 1984 to implement the International Agreement on Jute and Jute Products, 1982, now called the International Jute Study Group. See international commodity agreement.
	International Labor Organization	A United Nations specialized agency that establishes and monitors compliance with international standards for human and labor rights.
	International Lead and Zinc Study Group	The international organization formed in 1959 to share information about lead and zinc. See international commodity agreement.
	International liquidity	Refers to the adequacy of a country's, or the world's, international reserves. Under the Bretton Woods System, liquidity was a problem, since it depended on US dollars and thus a US deficit. The SDR was an attempt to fix this.
	International macroeconomics	Same as international finance, but with more emphasis on the international determination of macroeconomic variables such as national income and the price level.
	International monetary economics	Same as international finance, but with more emphasis on the role of money and less on other financial assets.
	International Monetary Fund	An organization formed originally to help countries to stabilize exchange rates, but today pursuing a broader agenda of financial stability and assistance. As of June 2007, it had 185 member countries.
	International Olive Oil Council	The intergovernmental organization in charge of administering the International Olive Oil Agreement, which originated in 1956. See international commodity agreement.
	International Organization for Migration	International organization assisting migrants and the management of migration.
	International parity conditions	Refers collectively to purchasing power parity and interest parity.
	International political economy	A field of study within social science, especially political science, that addresses the interrelationships between international economics and political forces and institutions.
	International price	World price
	International relations	1. All aspects of interactions among nations.
	International relations	2. The field within the discipline of political science that studies the mechanisms and institutions through which countries interact.
	International reserves	The assets denominated in foreign currency, plus gold, held by a central bank, sometimes for the purpose of intervening in the exchange market to influence or peg the exchange rate. Usually includes foreign currencies themselves (especially US dollars), other assets denominated in foreign currencies, gold, and a small amount of SDRs.
	International Rubber Study Group	An intergovernmental organization, founded in 1944, that provides a forum for the discussion of matters affecting the supply and demand for both synthetic and natural rubber. See international commodity agreement.
	International sanction	See sanction definition #2.
	International specialization	See specialization.
	International Standard Industrial Classification	A classification system for industries, organized by the activity performed by the industry, and used for recording and reporting data on industrial activities, including output and employment.
	International Sugar Organization	An intergovernmental body that administers the International Sugar Agreement of 1992. See international commodity agreement.
	International tax	1. If it existed, this could mean a tax levied by an international body on the governments or private sector actors throughout the world. This does not exist, however, except among small groups of countries that have agreed to share resources, such as the European Union.
	International tax	2. The field of study that deals with how separate national taxing authorities interact and how private sector actors respond to international differences in taxing regimes.
	International trade	See trade.
	International Trade Administration	A part of the United States Department of Commerce, the ITA acts on behalf of U.S. businesses in global competition. In trade policy, its Import Administration has the duty of determining whether imports are dumped or subsidized.
	International Trade Centre	An international agency whose purpose is to help developing countries export. It is a "joint technical cooperation agency" of UNCTAD and the WTO.
	International Trade Commission	The United States International Trade Commission
	International Trade Organization	Conceived as a complement to the Bretton Woods institutions -- the IMF and World Bank -- the ITO was to provide international discipline in the uses of trade policies. The Havana Charter for the ITO was not approved by the United States Congress, however, and the initiative died, replaced by the continuing and growing importance of the GATT.
	International Tropical Timber Organization	An organization created in 1983 for consultation among producers and consumers of tropical timber. An objective was that all timber traded by members should originate from sustainably managed forests.
	Internationalization	Another term for fragmentation. Used by Grossman and Helpman (1999).
	Intertemporal	Occurring across time, or across different periods of time.
	Intertemporal trade	Trade across time, as when a country imports in one time period paying for the imports with exports in a different time period, earlier or later. An imbalance in the balance of trade is presumed to reflect intertemporal trade.
	Intervention	See exchange market intervention.
	Intervention currency	A currency that is commonly used by central banks for exchange market intervention. See reserve currency.
	Intraindustry trade	Trade in which a country exports and imports in the same industry, in contrast to interindustry trade. Ubiquitous in the data, much IIT is due to aggregation. Can be horizontal or vertical. Grubel and Lloyd (1975) wrote the book on IIT.
	Intra-mediate trade	Another term for fragmentation. Used by Antweiler and Trefler (2002).
	Intra-product specialization	Another term for fragmentation. Used by Arndt (1997).
	Inventories	Goods being kept on hand for future use in production or future sale.
	Invertible	Said of a matrix if its inverse exists. That is, a matrix A is invertible if there exists another matrix B such that BA=I, where I is the identity matrix.
	Investment	1. Addition to the stock of capital of a firm or country.
	Investment	2. Purchase of an asset, real or financial.
	Investment	3. The use of resources today for the purpose of increasing productivity or income in the future.
	Invisible	In referring to international trade, used as a synonym for "service." "Invisibles trade" is trade in services. Contrasts with visible.
	Invoice	The itemized bill for a transaction, stating the nature of the transaction and its cost. In international trade, the invoice price is often the preferred basis for levying an ad valorem tariff.
	Inward FDI	Foreign direct investment by a foreign firm establishing a facility within the domestic country. Contrasts with outward FDI.
	IOM	International Organization for Migration
	IP	Intellectual property
	IPE	International political economy
	IPRs	Intellectual property rights
	IRR	Internal rate of return
	IRS	Increasing returns to scale = IRTS.
	IRTS	Increasing returns to scale.
	IS-Curve	In the IS-LM model, the curve representing the combinations of national income and interest rate at which aggregate demand equals supply for goods. It is normally downward sloping because a rise in income increases output by more than aggregate demand (through consumption), while a rise in the interest rate reduces aggregate demand through investment.
	ISEW	Index of sustainable economic welfare
	ISI	Import substituting industrialization
	ISIC	International Standard Industrial Classification
	IS-LM Model	A Keynesian macroeconomic model, popular especially in the 1960s, in which national income and the interest rate were determined by the intersection of two curves, the IS-curve and the LM-curve.
	IS-LM-BP Diagram	See IS-LM-BP Model.
	IS-LM-BP Model	A particular version of the Mundell-Fleming Model that extends the IS-LM model by including in the diagram a third curve, the BP-curve, representing the balance of payments and/or the exchange market.
	Iso-price curve	A curve along which price is (or prices are) constant, most commonly in factor-price space where it shows the combinations of prices of factors consistent with zero profit in producing a good at a specified price of the good.
	Isocost line	A line along which the cost of something -- usually a combination of two factors of production -- is constant. Since these are usually drawn for given prices, which are therefore constant along the line, an isocost line is usually a straight line, with slope equal to the ratio of the (factor) prices.
	Isoquant	A curve representing the combinations of factor inputs that yield a given level of output in a production function.
	Israel-US Free Trade Area	A free trade area between the United States and Israel that was initiated in 1985.
	ITA	International Trade Administration
	ITC	1. International Trade Centre
	ITC	2. International Trade Commission (USITC)
	ITO	International Trade Organization
	IWE	Integrated World Economy
	J-curve	The dynamic path followed by the balance of trade in response to a devaluation, which typically causes the trade balance to worsen before it improves, tracing a path that looks like a letter "J".
	Jobless rate	Same as unemployment rate.
	Jobless recovery	After a recession, an expansion of real GDP that is not accompanied by a significant expansion of employment. This is possible, for example, if labor productivity expands.
	Jobs argument for protection	Employment argument for protection.
	Joint venture	An undertaking by two parties for a specific purpose and duration, taking any of several legal forms. Two corporations, for example, perhaps from two different countries, may undertake to provide a product or service that is distinct, in kind or location, from what the companies do on their own.
	Jones Act	A U.S. law that prohibits foreign ships from transporting goods or people between one U.S. location and another. Such a restriction on cabotage is an example of a barrier to trade in a service.
	Jones' hat algebra	See hat algebra.
	Jubilee 2000	A movement advocating the cancellation of debts that burden developing countries, intended to occur in the year 2000.
	Juridical person	An entity other than a natural person, such as a partnership or a corporation, that is given some of the same rights as persons under the law.
	JV	Joint venture
	K	In economic models, K is commonly used to represent "capital." This is presumably due to the fact that German for capital is kapital, and also the fact the C is more commonly used to represent consumption.
	Kaldor-Hicks Criterion	The criterion that, for a change in policy or policy regime to be viewed as beneficial, the gainers should be able to compensate the losers and still be better off. The criterion does not require that the compensation actually be paid, which, if it did, would make this the same as the Pareto criterion. Due to Kaldor (1939), Hicks (1940).
	Kaldor-Hicks improvement	Potential Pareto improvement
	Kaldor improvement	Potential Pareto improvement
	Kaleidoscope comparative advantage	A variant of fragmentation due to Bhagwati and Dehejia (1994).
	Keiretsu	A group, or network, of manufacturing and other companies in Japan, usually centered around a bank and including a trading company. Keiretsus are characterized by cross-ownership of shares, strategic coordination, and preference for transactions within the network.
	Kemp-Wan Theorem	The proposition, due to Kemp and Wan (1976), that any group of countries can form a customs union that is Pareto-improving for the world, so long as nondistorting lump-sum transfers within the union are possible. This is accomplished by setting the vector of common external tariffs so as to leave world prices unchanged.
	Kennedy Round	The sixth round of multilateral trade negotiations that was held under GATT auspices, commencing 1964 and completed 1967. It was the first to move beyond negotiating only tariff reductions into such trade rules as anti-dumping.
	Keynesian	Referring to models of the aggregate economy based on ideas stemming from Keynes (1936). Keynesian models depart from neoclassical assumptions primarily by allowing for disequilibrium in labor markets, with aggregate employment and output being determined instead by aggregate demand.
	Knowledge capital	The knowledge-based assets that a firm acquires -- through R&D or by licensing technology from others, for example -- that it is then able to use for its activities throughout the firm, including in multiple production facilities.
	Knowledge capital model	A model of a multinational enterprise in which knowledge capital plays an essential role. Named and estimated by Carr et al. (2001), who attribute it to earlier work by Markusen and others.
	Knowledge economy	This term refers loosely to modern advanced economies in which knowledge -- both human capital and advanced technology -- is thought to be more important than other factors, such as capital and natural resources, for economic success.
	Kondratieff cycle	A cycle in economic activity hypothesized by Kondratieff (1926) to operate over a period of several decades and divided into four phases: spring (expansion), summer (recession), autumn (plateau), and winter (depression). Also called the Kondratieff wave or long wave.
	Kuznets Curve	An inverse U-shaped relationship between per capita income and inequality, suggesting that inequality is low in very poor countries, rises as they develop, and then ultimately falls as income rises still further. Hypothesized by Kuznets (1955).
	Labeling	A requirement to label imported goods with information about how they were produced. This is often suggested as an alternative to trade restrictions as a means to pursue particular trade-related objectives involving, for example, environment or labor standards.
	Labor abundant	A country is labor abundant if its endowment of labor is large compared to other countries. Relative labor abundance can be defined by either the quantity definition or the price definition.
	Labor augmenting	Said of a technological change or technological difference if one production function produces the same as if it were the other, but with a larger quantity of labor. Same as factor augmenting with labor the augmented factor. Also called Harrod neutral.
	Labor force	The number of available workers in a country, defined as the sum of those who are employed and those who are classed as unemployed.
	Labor intensive	Describing an industry or sector of the economy that relies relatively heavily on inputs of labor, usually relative to capital but sometimes to human capital or skilled labor, compared to other industries or sectors. See factor intensity.
	Labor market	A market for labor. Can refer to anything from local interactions between workers and employers to country-wide (not usually world-wide) markets dominated by broadly based labor unions, industry associations, and sometimes governments.
	Labor market restriction	A market restriction in the labor market, most often limits on wages and on the ability of firms to terminate workers.
	Labor mobility	The ability of workers to move between industries and locations to obtain higher wages or more favorable working conditions. Most models of international trade assume that labor is perfectly mobile within a country between industries and locations but not mobile at all between countries.
	Labor productivity	The value of output per unit of labor input. The reciprocal of the unit labor requirement.
	Labor right	See labor standard.
	Labor-saving	A technological change or technological difference that is biased in favor of using less labor, compared to some definition of neutrality.
	Labor scarce	A country is labor scarce if its endowment of labor is small compared to other countries. Relative labor scarcity can be defined by either the quantity definition or the price definition.

Share This Flashcard Set

Set the Language

Related Flashcards

Deardorff's Glossary Of International Economics 1

Add to Folders

Upgrade to Cram Premium

Card Range To Study

1764 Cards in this Set