Economics Flashcards
Regulatory Arbitrage
When businesses shop for a country that allows a specific behavior rather than changing the behavior.
Domestic Fisher Relation
Rnom = Rreal + E(Inflation)
Self Regulatory Bodies
Private organizations that represent as well as regulate their members. SRBs may have conflicts of interest that can reduce their effectiveness.
Independent Regulators
Given recognition by government agencies and have power to make rules and enforce them. However, independent regulators are not funded by the government and are politically independent.
Self Regulatory Organization
Self Regulatory Body that is recognized by the government and given enforcement powers. Not government funded and politically independent. They are a type of independent regulator.
International Fisher Relation
Rnom-a - Rnom-b = E(Inflation-a) - E(Inflation-b)
Neoclassical Growth Theory
States that the sustainable growth rate of GDP is a function of population growth, labors share of income, and the rate of technological advancement. Growth gains from other means such as increased savings are only temporary.
Regulatory Competition
Regulators compete to provide the most business-friendly regulatory environment. They use regulations to make an industry more attractive for competition.
Unbiased Predictor
When the forward rate is equal to the expected future spot rate.
Absolute Purchasing Power Parity
Compares the average price of a representative basket of consumption goods between countries. In practice this may not hold as the weights of the various goods may not be the same.
S(A/B) = CPI(A) / CPI(B)
Regulatory Capture
Theory based upon the assumption that, regardless of the original purpose behind its establishment, a regulatory body will, at some point in time, be influenced or controlled by the industry being regulated.
Dealer Spread Factors
- The spread for an interbank market for the same currency pair
- The size of the transaction (larger orders require a larger spread because of liquidity)
- The relationship between the dealer and client
Endogenous Growth Theory
Investment in all types of capital can have constant returns, unlike neoclassical that assumes diminishing returns to capital. This assumption allows for a permanent increase in the growth rate attributable to an increase in the savings rate. Research and development expenditures are often cited as examples of capital investment that increase technological progress.
