99 TERMINOLOGIES Flashcards
is a national accounting system that records all receipts coming into the nation and all payments to entities in other countries.
balance of payments
is a national account that records transactions involving the purchase and sale of assets.
capital account
is a national account that records transactions involving the export and import of goods and services, income receipts on assets abroad, and income payments on foreign assets inside the country
current account
occurs when a country imports more goods and services and pays more abroad than it exports and receives from abroad.
current account deficit
occurs when a country exports more goods and services and receives more income from abroad than it imports and pays abroad.
current account surplus
states that firms undertake FDI when the features of a particular location combine with ownership and internalization advantages to make a location appealing for investment.
eclectic theory
the purchase of physical assets or a significant amount of the ownership of a company in another country to gain a measure of management control
foreign direct investment
Purchase of land in another country and construction of new facilities or an entire subsidiary from the ground up.
greenfield investment
Theory stating that a company begins by exporting its product and later undertakes foreign direct investment as the product moves through its life cycle.
international product life cycle
Theory stating that when an imperfection in the market makes a transaction less efficient than it could be, a company will undertake foreign direct investment to internalize the transaction and thereby remove the imperfection
market imperfection
Theory stating that a firm tries to establish a dominant market presence in an industry by undertaking foreign direct investment
market power
Investment that does not involve obtaining management control in a company
portfolio investment
System of production in which each of a product’s components is produced where the cost of producing that component is lowest.
rationalized production
Extension of company activities into stages of production that provide a firm’s inputs (backward integration) or that absorb its output (forward integration).
vertical integration
Economic integration by which countries remove all barriers to trade and to the movement of labor and capital among themselves and set a common trade policy against nonmembers.
common market
Economic integration by which countries remove all barriers to trade among themselves and set a common trade policy against nonmembers.
customs union
Economic integration by which countries remove barriers to trade and the movement of labor and capital among members, set a common trade policy against nonmembers, and coordinate their economic policies.
economic union
European Union plan that established its own central bank and currency
european monetary union
Economic integration by which countries remove all barriers to trade among themselves but where each country determines its own barriers against nonmembers.
free trade area
Economic and political integration by which countries coordinate aspects of their economic and political systems.
political union
Process by which countries in a geographic region cooperate to reduce or eliminate barriers to the international flow of products, people, or capital.
regional economic integration (regionalism)
Increase in the level of trade between nations that results from regional economic integration.
trade creation
Diversion of trade away from nations not belonging to a trading bloc and toward member nations.
trade diversion
System that allocates financial resources in the form of debt and equity according to their most efficient uses.
capital market
Process of aggregating the currencies that one bank owes another and then carrying out the transaction.
Clearing
Currency that trades freely in the foreign exchange market, with its price determined by the forces of supply and demand.
convertible currency
Practice of selling goods or services that are paid for, in whole or in part, with other goods or services.
counter trade
Instantaneous purchase and sale of a currency in different markets for profit.
currency arbitrage
Practice of insuring against potential losses that result from adverse changes in exchange rates.
currency hedging
Right, or option, to exchange a specified amount of a currency on a specified date at a specified rate
currency option
Purchase or sale of a currency with the expectation that its value will change and generate a profit.
currency speculation
Simultaneous purchase and sale of a currency for two different dates.
currency swap
Risk that an exchange rate change will affect a company’s longerterm earnings potential from international operations.
economic exposure
Bond issued outside the country in whose currency it is denominated.
Eurobond
Market consisting of all the world’s currencies that are banked outside their countries of origin
eurocurrency market
Rate at which one currency is exchanged for another.
exchange rate
Potential for adverse changes in exchange rates that could harm a business.
exchange rate risk
Bond sold outside the borrower’s country and denominated in the currency of the country in which it is sold.
foreign bond
Market in which currencies are bought and sold and their prices are determined.
foreign exchange market
Contract that requires the exchange of an agreed-on amount of a currency on an agreed-on date at a specified exchange rate.
forward contract
Market for currency transactions at forward rates.
forward market
Exchange rate at which two parties agree to exchange currencies on a specified future date.
forward rate
Interest rates that the world’s largest ban
interbank interest rate
Market in which the world’s largest banks exchange currencies at spot and forward rates.
interbank market
Profit-motivated purchase and sale of interest-paying securities denominated in different currencies.
interest arbitrage
Market consisting of all bonds sold by issuing companies, governments, or other organizations outside their own countries.
international bond market
Network of individuals, companies, financial institutions, and governments that invest and borrow across national boundaries.
international capital market
Market consisting of all stocks bought and sold outside the issuer’s home country
international equity market
Country or territory whose financial sector features very few regulations and few, if any, taxes.
offshore financial market
Market for currency transactions at spot rates.
spot market
Exchange rate requiring delivery of the traded currency within two business days.
spot rate
Risk that an exchange rate change will affect the value of a business transaction.
transaction exposure
Risk that an exchange rate change will affect a company’s financial statements.
translation exposure
Currency used as an intermediary to convert funds between two other currencies.
vehicle currency
Arrangement (1944) among nations to create a new international monetary system based on the value of the US dollar.
bretton woods agreement
Monetary regime based on an explicit commitment to exchange domestic currency for a specified foreign currency at a fixed exchange rate.
currency board
Intentionally lowering the value of a nation’s currency
Devaluation
View that prices of financial instruments reflect all publicly available information at any given time.
efficient market view
System in which the exchange rate for converting one currency into another is fixed by international governmental agreement.
fixed-exchange rate system
Exchange-rate system in which currencies float freely against one another without governments intervening in currency markets.
free float system
Technique that uses statistical models based on fundamental economic indicators to forecast exchange rates.
fundamental analysis
Economic condition in which a trade deficit causes a permanent negative shift in a country’s balance of payments.
fundamental disequilibrium
International monetary system in which nations link the value of their paper currencies to specific values of gold.
gold standard
View that prices of financial instruments do not reflect all publicly available information.
inefficient market view
Collection of agreements and institutions that govern exchange rates.
international monetary system
Arrangement (1976) among IMF members to formalize the existing system of floating exchange rates as the new international monetary system.
jamaica agreement
Principle that an identical item must have an identical price in all countries when the price is expressed in a common currency
law of one price
Exchange-rate system in which currencies float against one another, with governments intervening to stabilize their currencies at particular target exchange rates.
managed float system
Intentionally raising the value of a nation’s currency
Revaluation
Arrangement (1971) among IMF members to restructure and strengthen the international monetary system created at Bretton Woods.
smithsonian agreement
IMF asset whose value is based on a “weighted basket” of five currencies.
special drawing right
Technique that uses charts of past trends in currency prices and other factors to forecast exchange rates.
technical analysis
Export/import financing in which an importer pays an exporter for merchandise before it is shipped.
advance payment
Individual or organization that represents one or more indirect exporters in a target market.
Agent
Exchange of goods or services directly for other goods or services without the use of money
Barter
Contract between an exporter and a shipper that specifies merchandise destination and shipping costs.
bill of lading
Export of industrial equipment in return for products produced by that equipment.
Buyback
Sale of goods or services to a country by a company that promises to make a future purchase of a specific product from that country.
Counterpurchase
Selling goods or services that are paid for, in whole or in part, with other goods or services.
Countertrade
Companies use licensing agreements to exchange intangible property with one another.
cross licensing
A company sells its products directly to buyers in a target market.
direct exporting
Export/import financing in which a bank acts as an intermediary without accepting financial risk.
documentary collection
Document ordering an importer to pay an exporter a specified sum of money at a specified time.
draft (bill of exchange)
Institutional arrangement by which a firm gets its products, technologies, human skills, or other resources into a marke
entry mode
Company that exports products on behalf of indirect exporters.
export management company (EMC)
Company that provides services to indirect exporters in addition to activities related directly to clients’ exporting activities.
export trading company (etc)
One company (the franchiser) supplies another (the franchisee) with intangible property and other assistance over an extended period.
Franchising
Specialist in export-related
activities such as customs clearing,
tariff schedules, and shipping and
insurance fees.
freight forwarder
A company sells its products to intermediaries who then resell to buyers in a target market.
indirect exporting
Separate company that is created and jointly owned by two or more independent entities to achieve a common business objective.
joint venture
Export/import financing in which the importer’s bank issues a letter pledging to pay the exporter when the exporter fulfills the terms listed in the letter.
letter of credit
One company owning intangible property (the licensor) grants another business (the licensee) the right to use that property for a limited period of time.
Licensing
Agreement that a company will offset a hard-currency sale to a nation by making a hard-currency purchase of an unspecified product from that nation in the future.
Offset
Export/import financing in which an exporter ships merchandise and later bills the importer for its value.
open account
Relationship whereby two or more entities cooperate (but do not form a separate company) to achieve the strategic goals of each.
strategic alliance
One company sells to another its obligation to make a countertrade purchase in a country
switch trading
A company designs, constructs, and tests a production facility for a client
turnkey (build-operate-transfer)
Facility entirely owned and controlled by a single parent company
wholly owned subsidiary
