Glossary Flashcards
Balance of payments
The Balance of Payments shows a countries transactions with the rest of the world. It notes inflows and outflows of money and categorises them into different sections. The different sections of the Balance of Payments are: Current account balance of payments and Financial account balance of payments
Current account balance of payments
Measures transactions for goods and services.(used to be called visible and invisibles) The current account comprises the trade balance (which is trade in goods) and also includes the balance for trade in services.
When people refer to a balance of payments deficit they invariably mean a current account deficit
Financial account balance of payments
Also known as capital balance of payments. The financial account measures inflows of capital both short term and long term. this includes
- foreign direct investment
- Purchase of securities by investors
Balance of payments crisis
This occurs when the current account deficit cannot be maintained. It means there will be a fall in foreign exchange reserves and the country can no longer attract sufficient capital flows to finance the current account deficit.
The solution to a balance of payments crisis is usually to devalue the currency and slow down consumer spending on imports, usually by causing a recession
Exchange rates
Price for which the currency of a country can be exchanged for another country’s currency. Factors that influence exchange rate include (1) interest rates, (2) inflation rate, (3) trade balance, (4) political stability, (5) internal harmony, (6) high degree of transparency in the conduct of leaders and administrators, (7) general state of economy, and (8) quality of governance
IMF quota system
Quota subscriptions are a central component of the IMF’s financial resources. Each member country of the IMF is assigned a quota, based broadly on its relative position in the world economy. A member country’s quota determines its maximum financial commitment to the IMF, its voting power, and has a bearing on its access to IMF financing
UNCTAD
UNCTAD is a permanent intergovernmental body established by the United Nations General Assembly in 1964.
UNCTAD is the principal organ of the United Nations General Assembly dealing with trade, investment, and development issues
New International Economic Order, NIEO
The New International Economic Order (NIEO) was a set of proposals put forward during the 1970s by some developing countries through the United Nations Conference on Trade and Development to promote their interests by improving their terms of trade, increasing development assistance, developed-country tariff reductions, and other means. It was meant to be a revision of the international economic system in favour of Third World countries, replacing the Bretton Woods system, which had benefited the leading states that had created it – especially the United States
Most Favoured Nation, MFN
Under the WTO agreements, countries cannot normally discriminate between their trading partners. Grant someone a special favour (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members.
This principle is known as most-favoured-nation (MFN) treatment
New Institutional Economics
New institutional economics (NIE) is an economic perspective that attempts to extend economics by focusing on the social and legal norms and rules (which are institutions) that underlie economic activity and with analysis beyond earlier institutional economics and neoclassical economics.[1] It can be seen as a broadening step to include aspects excluded in neoclassical economics. It rediscovers aspects of classical political economy
East Asian Tigers
The four Asian tigers are the high-growth economies of Hong Kong, Singapore, South Korea and Taiwan. The four Asian tigers have consistently maintained high levels of economic growth since the 1960s, fueled by exports and rapid industrialization, which enabled these economies to join the ranks of the world’s richest nations. Hong Kong and Singapore are among the biggest financial centers worldwide, while South Korea and Taiwan are important hubs of global manufacturing in automobile and electronic components as well as information technology, respectively.
Structural adjustment Policies
Economic policies which countries must follow in order to qualify for new World Bank and International Monetary Fund (IMF) loans and help them make debt repayments on the older debts owed to commercial banks, governments and the World Bank. Although SAPs are designed for individual countries but have common guiding principles and features which include export-led growth; privatisation and liberalisation; and the efficiency of the free market
Generalized System of Preferences , GSP
Programmes by developed countries granting preferential tariffs to imports from developing countries
The General Agreement on Tariffs and Trade (GATT)
GATT was the first world-wide multi-lateral free trade agreement. It was in effect from June 30, 1948, until January 1, 1995, when it was absorbed by the World Trade Organization (WTO).
Gold Standard
The gold standard was a commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold. National money and other forms of money (bank deposits and notes) were freely converted into gold at the fixed price
Keynesianism
The essential element of Keynesian economics is the idea the macro economy can be in disequilibrium (recession) for a considerable time. Keynesian economics advocates government intervention to help overcome the lack of aggregate demand to reduce unemployment and increase growth
Neoclassical theory
Neoclassical economics is an approach to economics focusing on the determination of goods, outputs, and income distributions in markets through supply and demand. This determination is often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits by firms facing production costs and employing available information and factors of production, in accordance with rational choice theory.
Neoclassical economics dominates microeconomics, and together with Keynesian economics forms the neoclassical synthesis which dominates mainstream economics today
Stable Currencies
A stable currency is a currency which successfully performs its functions as a means of exchange, unit of account and a store of value because its purchasing power is stable
Debt default
Default is the failure to pay interest or principal on a loan or security when due
Debt restructuring
Debt restructuring is a method used by debtors with outstanding debt obligations to alter the terms of the debt agreements in order to achieve some advantage. This can include rescheduling
Sustainability (of debt level)
situation in which a borrower is expected to be able to continue servicing its debts without an unrealistically large future correction to the balance of income and expenditure. Sustainability rules out any of the following: a situation in which a debt restructuring is already needed (or expected to be needed); a situation where the borrower keeps on indefinitely accumulating debt faster than its capacity to service these debts is growing (a Ponzi game); or a situation in which the borrower lives beyond its means by accumulating debt in the knowledge that a major retrenchment will be needed to service these debts (even if nothing in the external environment changes). The cost of financing is a key factor influencing debt accumulation (i.e., the present value budget constraint), and thus sustainability. Sustainability thus incorporates the concepts of solvency and of liquidity, without making a sharp demarcation between them
Additionality (in debt restructuring)
debt reduction on top of ODA commitments