Plir Mid Alphabetized

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Appreciation/Depreciation

Back 1

when a currency's purchasing power is raised relative to another currency; significant because it increased import competition; this is when a country's currency's purchasing power is lowered relative to another currency; significant because it raises export competitiveness; country use exchange rate policy to improve dom econ cond. Conflict btw INTL COOP ND AUTO. CHANGING RATES PROD WINNERS ND LOSERS: happy [ EXPORTERS ] and which are not [ DOMESTIC BUYERS COS PURCHASE PWR DROP ]

Front 2

Backward and Forward Linkages

Back 2

Backward linkages can be defined as "the growth of an industry leads to the growth of the industries that supply inputs to it"; Forward linkages exist when the growth of an industry leads to the growth of other industries that uses its output as input; significant because it shows the development and potential growth brought about by FDI

Front 3

Brain Drain

Back 3

When human capital resources are trained in a country and then leave for another. Example of an Indian immigrant coming to the U.S. to study medicine and then they leave for India. Significant because it represents a loss of both human capital, and resources as technology and education is transferred to another nation and lost in the host country.

Front 4

Bretton Woods Conference

Back 4

gathering in 1944 of delegates of the Allied nations in Bretton Woods, New Hampshire; intended to regulate the international monetary and financial order after conclusion of WWII; instituted the IMF and the GATT and put Bretton Woods system in place

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Bretton Woods System

Back 5

Signed in 1944 at Bretton Woods, after WW2 to create an international monetary system that established the IMF and the World Bank; ended in 1971 by Nixon. It was based upon the dollar being pegged to gold, $35 to 1 ounce of gold, fixed exchange rates and temporary financing facilities. Significant because it helped to facilitate an environment of stability, establishing a lender of last resort, and creating short term lending in support of fixed exchange rates; increased embedded liberalism.

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CAPITAL ACCT

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part of the balance of payments accounts that measures the flows of capital in and out of the country. SIG COS CAP ACCT IMBAL LEAD TO BAL OF PAY IMBAL, ND REQUIRE COUNT TO ADJUST VALUE OF CURRENCY ACCORDINGLY.

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Capital Controls

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Any measure taken by a government, central bank or other regulatory body to limit the flow of foreign capital in and out of the domestic economy.; significant because higher capital controls LIMIT OUTFLOWS SO AS TO PREVENT BANKING CRISES

Front 8

CB INDEP

Back 8

The central bank's freedom from political pressure. INDEP CENTRAL BANKS BETTER ABLE TO DELIVER LOW INFLATN TH R CENTRAL BANKS CTRL BY GOVT

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Collective Action Problem

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Situation in which all parties benefit but there is a cost to the action. Cost is disproportionately borne by the party that undertakes the action, but benefit shared by all. In international political economy, it has been used to understand interest-group formation, and in particular, why consumer interests are underrepresented in trade policy.

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Commodity-backed Currency

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currency that's value is based on the fact that it can be readily converted to a commodity such as gold or silver; significant because COMM BK SYS LIKE GS FOUNDAN 4 the international economy under Great Britain's hegemony in the 19th Century

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Comparative Advantage

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The ability of aN ENTITY to produce goods and/or services at a lower opportunity cost than other ENTITIES.; this is significant for this class because Even if one country is more efficient in the production of all goods (absolute advantage in all goods) than the other, both countries will still gain by trading with each other

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Competitive Devaluation

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When a country tries to devalue its currency to increase its international competitiveness; significant COS this encourages other countries to also devalue to retain their competitiveness, CLD LEAD TO race to the bottom OF currencieS ND BEGGAR THY NEIGH POL. CONFLICT BTW INTL COOP ND DOM AUTO [ BENEFIT URSELF BUT HARM OTHERS IN TRADE ]

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Currency peg

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A policy that binds the value of a nation's currency to another unit of exchange, either the currency of another country (often the dollar) or gold. Currency pegs are often used by countries to STABILIZE VALUE OF THEIR $

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Currency Union

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A group of countries using a common currency. Examples include the European Union. Significant because it creatES COOP AMONGST nations 4 COMMON BENEFIT BUT ALSO a lack of monetary policy AUTO ND LOSS OF INDIVID BENEFIT.

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DISPUTE SETTLE MECH

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QUASI-JUDICIAL TRIBUNAL TO RESOLVE TRADE DISPUTES BTW WTO MEMBER GOVT. SIG IS IT SHOWS ROLE OF MULTILAT INST IN FOSTER INTL COOP BY LEGALIZE INTL RELAT

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DIST CONSEQ

Back 16

DECI ABT RESOURCE ALLOCAN HV DIST CONSEQ, I.E. AFFECT HOW INCM DIST BTW GRPS IN COUNTRIES ND BTW COUNTRIES IN INTL SYS, SIG COS IF A COUNT USE TOO MANY RESOURCES ON ECON ACT THAT IT DOES RELATIVE LESS WELL AT, IT IS POORER AS A RESULT, ALSO PRODUCES WINNERS AND LOSERS OF RESOURCE ALLOCATN POL ND CAUSE FORM OF INTEREST GRPS THAT WLD FAVOR PROT OR OPPOSE IT

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Embedded Liberalism

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idea that countries remain open as much as domestic political constraints allow; significant because it reflects the SPREAD OF PLTL SUFFRAGE THRO OUT E WORLD THAT IMPOSED democratic constraints ON GOVT IN the 20th Century

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EXPORT PROCESS ZONES

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INDUST ESTATES WHERE GOVT SUPPLY LAND, UTILITIES, TRANSPORT INFRAS, ETC TO INVESTING FIRMS AT SUBSID RATES. EST BY DVLP COUNT TO ATTRACT FDI BY MNC

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Expropriation

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The act of SEIZING PRIV property by a government to be used for the benefit of the public; significant because it is a reason that MNC's hesitate to engage in FDI in certain countries; can also cause conflict between MNC and host country and in turn conflict between host country and home country (E.G., BTW US ND Guatemala 1940's-1950's)

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FACTOR PRICE EQUALIZATION

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IN OPEN ECON, INTL TRADE WILL CAUSE PRICE OF FACTORS OF PROD TO EQUALIZE. E PRICE OF EACH COUNT SCARCE FACTOR WILL FALL WHILE E PRICE OF EACH COUNT ABUNDANT FACTOR WILL RISE. EVENTUAL PRICES OF LABOR/CAPITAL R SAME IN TRADING COUNT

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FACTOR PRICES

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Market prices for labor, land and capital. This dictates the TYPE OF PROD COUNT SHLD SPECIALIZE IN. EG LOW PRICE LABOR SHLD PROD LABOR – INTENSE GDS

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Factors of Production

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the inputs that GO inTO the production of goods or services to make an economic profit. The factors of production include land, labor, capital and entrepreneurship.

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Fiat Currency

Back 23

a currency that is backed only by a government's commitment to honor its value; credibility of the government's commitment is key; significant because SINCE there is no constraint on the amount of money that can be created, there CAN BE uncontrolled printing of money, resulting in hyperinflation AND LOSS OF FAITH IN $ VALUE.

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Firm-specific Capital

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INTANGIBLE assets such as technology or brand names that cannot be easily appropriated by host governments; E MORE CAP-INTENSIVE ND HARDER TO COPY E ASSET, E LESS BARGAINING PWR GOVT HAS IN renegotiation of TRADE agreements W E FIRMS; EXPL Y FDI INTEG HORIZON: TO keep control of Firms' specific assets within the firm;

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Fixed Exchange Rate

Back 25

A exchange rate regime under which the government ties ITS CURRENCY official exchange rate to another country's currency (or COMMODITY LIKE gold); significant because it provide certainty for exporters and importers, helps the government maintain low inflation, ND STIMULATE CROSS BORDER TRADE ND INVEST

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Floating Exchange Rate

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A floating exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. significant because it GIVES a country flexibility to respond to changing economy COND and alter POL ACCORD; favored by those who would be helped by inflationary policies [ E.G. A COUNTRY W HIGH LVL NAT DEBT ] ND EXPORT-ORIENTED INDUST

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Foreign Direct Investment

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A FORM OF CROSS BORDER INVEST IN WHICH A MNC IN 1 COUNTRY OWNS A PRODUCT ASSET IN ANOTHER COUNTRY, EITHER BY CONSTRUCT NEW OR BUY OF EXISTING COMP, significant because SPILLOVER EFFECTS SPUR economic development, ALSO it can facilitate foreign market access when trade is DIFF by bypassing trade restrictions, avoiding high transport costs. ALSO TO MAINTAIN CONFIDENTIALITY OF FIRM-SPECIFIC ASSETS

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GATT/WTO

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GATT - a multilateral treaty signed in 1947 to promote trade, esp by means of the reduction and elimination of tariffs and import quotas.
WTO-an international organization based in Geneva that MONITORS and enforces global trade rules.

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Heckshcher Olin Theorem

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STATES A capital-abundant country will export the capital-intensive good, while the labor-abundant country will export the labor-intensive good, significant because it BUILDS ON THEORY OF comparative advantage and shape trade and production CHOICES OF a country.

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Hegemony

Back 30

the dominance or leadership of one social group or nation over others; examples include 19th C Great Britain and 20th C US; significant because according to hegemonic stability theory hegemon is necessary to maintain OPEN ND STABLE INTL ECON SYS, provide public goods [ COLLECT SEC ], and act as a lender of last resort ND MKT 4 DISTRESSED GDS

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Hold-up Problems

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a situation where two parties may be able to work most efficiently by cooperating but refrain from doing so because of concerns that they may give the other party increased bargaining power and reduce their own profits; significant because this a legit concern that COMPLICATES NEGOTIATions between firms and countries WRT specific ASSETS

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Hyper Inflation

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Extremely rapid or out of control inflation; Occurs when a government AGGRESSIVE printing money to pay debt; significant because it decreases the purchasing power of consumers, SO consumers tend to hold more wealth in the form of physical commodities, leading to more bartering than trading, only winners in hyperinflation are those who borrowed before the hyperinflation, higher prices makes their debt worth less.

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IMF

Back 33

An international organization established in 1945 that aims to promote international trade and monetary cooperation and the stabilization of exchange rates AND RESOLVE DEBT CRISES IN DVLP CRISES. IMPT COS OF ROLE IN PRESERV ORDER IN INTL ECON

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Issue-linkages

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To connect issues, establishing a relationship making progress in area "A" CONTINGENT on progress in area "B."; relevant because multilateral institutions USE LINK TO FOSTER INTL COOP BY, FOR E.G., DISCOURAGE DEFECTION

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Lender of Last Resort

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A lender of last resort is an institution willing to extend credit when no one else will. This is relevant to the course because the lender of last resort is A public good that Hegemonic Stability THEORISTS expect the world's HEGEMON to provide FOR STABIL OF the global economy.

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Liquid Capital

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Assets held in cash or in something that can be readily turned into cash; significant because in today's global economy, developing countries have easier access to liquid capital ABROAD, but if a country becomes too dependent on foreign liquid capital, any political or economic difficulties can be exacerbated by capital flight.

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Log-rolling

Back 37

the trading of favours, QUID PRO QUO, such as support OF DIFF INDUST for EACH OTHER’S trade protection POL; results in protection for all industries even though each one wanted protection JUST for themselves and not protection for all; significant because it CAUSED THE SMOOT HAWLEY TARIFF, INADVERTENT RAISE BARRIERS TO FREE TRADE, ND EXACERBATE E GLOBAL DEPRESS OF 30S BY CLOSING OFF MKT FOR DISTRESS GDS

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Marriage of Iron and Rye

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with the depression of world economy in 1873, German farmers and industrialists each wanted protective tariffs for their respective sectors; to guarantee that they protect themselves, they allied with each other against labor which brought about both agricultural and industrial tariffs even though NEITHER party wanted both and were seeking only their own protection; significant because it illustrates HOW log-rolling CAN bogs down FREE trade

Front 39

Median-voter Theorem

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a politician can maximize their number of votes by committing to the policy position preferred by the median voter; significant because this shows how domestic situation can shape a country's foreign economic policy;

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Most-favored nation status

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idea that if a country grants a trade BENEFIT to one country they must grant that BENEFIT to all countries with MFN status; important because it facilitates ECON openness and INCR VOL OF global trade;

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Multilateral Institutions

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binding international agreements that govern signatory countries' economic policies; examples include the IMF, World Bank, and WTO; significant because they facilitate openness, and balance openness with domestic constraints in a modern globalized ECON and were CRUCIAL TO Bretton Woods system;

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Multinational Corporations

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a corporation that manages production or delivers services in more than one country; significant because MNCs engage in FDI and are SOUGHT AFTER for economic development reasons, WINNERS OF MNC INVEST R HIGH-SKILLED WKERS WHO GET HIGHER WAGES ND MORE BENEFITS TH IF WK IN LOCAL FIRMS; LOSERS R LOCAL CAPITAL OWNERS WHO INCUR HIGEHR COSTS TO ATTRACT WKERS ND WHOSE GDS MAY NOT BE AS COMPETITIVE AS MNC GDS

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Mundell-Fleming Dilemma/The Unholy Trinity

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idea that countries can sustain only two of the tHree COND AT ANY 1 TIME: fixed exchange rates, independent monetary policy, and capital mobility; selection AMONG these illustrates trade-off between stability and flexibility; significant because when countries attempt to have all three SIMULTANEOUS, a financial crisis (E.G. DEPLETN OF FOREX RESERVES) MAY ensue

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NON TARIFF BARRIER

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A POLICY OR STRUC BARRIER TO TRADE OTHER TH TARIFFS. EG HEALTH ND SAFETY REGULAN, anti-dumping LAWS, ND Voluntary export restraints, AS TARIFFS LARGELY DISSOLVED, NTB HAVE BCOM 1 OF E BIGGEST REMAIN OBSTACLES TO INTL TRADE ND SO R AN IMPT ISSUE IN E WTO

Front 45

Object gap VS IDEA GAP

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A nation that lacks physical objects like factories and roads suffers from an object gap. A nation that lacks the knowledge used to create value in a modern economy suffers from an idea gap; significant because GAPS can be RESOLVED by FDI; also significant because this can determine what a COUNT SHLD SPECIALIZE IN PRODUCING [ EG CAP SCARCE COUNT EXPORT LABOR INTENSIVE GDS ]

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OBSOLESCING BARGAIN

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A TYPE of interaction between a MNC and a host country government, which initially reach a SETTLE that favors the MNE, but over time as the MNC's fixed assets in the country increase, the government GAINS MORE bargaining poweR

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Off-shoring

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moving production abroad to be done by a separate company; different from FDI; can present a problem because of "sweatshop" conditions and exploitation of repressED labor.

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Public Good

Back 48

non-rivalrous and non-excludable goods; significant because the BURDEN is on the hegemon to provide them; public goods WLD ONLY BE PROV IF BENEFITS OF PROV EM EXCEED COSTS; OFTEN, private INTERESTS R MOTIVATING FORCE 4 PROV OF public good

Front 49

Push and Pull Incentives

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Push incentives are reasons to leave the home country, which include poor economic conditions, and political INSTAB, Pull incentives are reasons to relocate to another country due to higher expected income, MORE SEC ENV, and REUNIFICATN W FAM. Significant because WINNERS R HIGH SKILLED WKERS ND CAP OWNERS AS SKILLS OF HIGH SKILLED MIGRANTS CN COMPLEMENT E JOBS OF DOM HIGH SKILLED WKERS ND LOSERS R LOW SKILLED MIGRANTS WHOSE JOBS MIGHT BE GIVEN TO LOW SKILLED LABORERS TO LOWER COSTS. Tax payers MAY fear an increased tax burden due to MORE consumption of WELFARE RESOURCES.

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Race to the Bottom

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countries look to get rid of labor and environmental regulations in order to attract FDI or aid in hopes of spurring economic development; countries also providing subsidies to MNCs while neglecting conditions of labor; significant because this can be a negative effect of FDI

Front 51

Reciprocal Trade Agreements Act

Back 51

authorize the president to establish tariff-reduction agreements with foreign countries without Congressional approval; relevant because it encouraged mutually beneficial negotiations and trade with foreign governments, and it led to the CREATION OF GATT.

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Regional trade agreements

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TRADE AGREE WHERE few to no trade barriers amongst members but THERE R TARIFFS DISCRIM BTW MEMBERS ND NON MEMBERS. EITHER Stepping Stones or Stumbling Blocks to a multilateral agreement.

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Repeal of the Corn Laws

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Great Britain uniLAtErily repealed import tariffs which protected grain prices in the UK despite opposition from domestic agricultural interests; marked a significant step towards free trade ND DECLINE OF REP OF AGRI INTERESTS; SHOW the NEED 4 a hegemonic leader 2 LEAD E WAY IN TRADE LIBERAL as BASED ON the Hegemonic Stability Theory;

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Ricardo-Viner [SECTORAL] Model

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A PLTL MODEL THAT ARG TRADE POL IS CH BY COMP BTW IMPORT COMPET ND EXPORT ORIENTED INDUST, INDUST THAT RELY ON SCARCE FACTOR HARMED BY TRADE ND SO LOBBY 4 PROT. INDUST THAT RELY ON ABUNDANT FACTOR BENEFIT FR TRADE ND LOBBY 4 TRADE LIBERAL. SHOWS WINNERS ND LOSERS THAT ARISE FR FACTOR ENDOWMENTS OF E COUNT, QN E SS MODEL THAT ASSUMES FACTORS R MOBILE

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Seignorage

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The profit made by a government from the printing of money, literally the face value of the money minus the cost of making it. In international exchange, if one country's money is BOUGHT by another, the first country derives seigniorage benefits. SINCE US IS HEGEMON ND US $ IN HIGH DEMAND 4 INTL COMMERCE, US BENEFITS SO SHOW ADV OF BE HEGEMON

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Spillover Effects

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externalities of economic activity that can be both positive and negative; significant because FDI creates spillovers such as backward and forward linkages, labor repression, POOR REG OF MNCS DUE TO race to the bottom TO ATTRACT THEIR INVEST, environmental hazards, etc.

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Stolper - Samuelson Theorem

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says that free trade raises the income of those who own the locally abundant factor and reduces the income of those who own the locally scarce factor; significant because it BUILDS ON law of comparative advantage and can also help determine STANCES of these factors ON PROT (E SCARCE FACTOR FAVOR PROT WHILE E ABUNDANT DUN)

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Tariff

Back 58

a tax levied on imports or exports; usually associated with protectionism; means of governmental control over trade between nations to support its domestic interests; significant because it represents a barrier to, ND DOM CONSTRAINTS ON, free trade

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TRADE DIVERSION

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the shifting of trade away from the low-cost producer towards a higher-cost producer as a result of a reduction in trade barriers with the country of the higher-cost producer

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Transaction Costs

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The costs other than the money price that are incurred in trading goods or services; these could be INFO AND ENFORCE costs; relevant because they were significantly lowered in the Bretton Woods system with the creation of multilateral international institutions LIKE IMF, WB ETC.

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VERTICAL ND HORIZONTAL FDI

Back 61

HORIZONTAL occurs when a corporation creates multiple production facilities, each of which produces the same good or goods, IN DIFF COUNTRIES. Firms integrate horizontally to MAINTAIN the full value of theIR intangible assets.
VERTICAL: a single firm controls the different stages of the production process, rather than USING the market to GET inputs and sell outputs. Difficulties inherent in long-term contracting create incentives for vertical integration.