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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 of a trade regime refers to whether the structure of protection favors importable or exportable, based on comparing their effective rates of protection. If these are equal, the trade regime is said to be neutral. 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.
Bicycle Theory: With regard to the process of multilateral trade liberalization, the theory that if it ceases to move forward i. Bid rate: The rate at which a market maker is willing to buy the quoted asset. Bid: The price at which one can buy a currency. Bid-ask spread: The difference between the buying and selling rates.
It is 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. Bid-offer spread: The difference between the interest rate at which the bank borrows money and lends money. Bilateral agreement: An agreement between two countries, as opposed to a multilateral agreement.
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. Bilateral: Between two countries, in contrast to ploy-lateral and multilateral. Bill of exchange: Any document demanding payment such as a bank draft. 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. A document that establishes the terms and conditions of a contract between a shipper and a shipping company under which freight is to be moved between specified points for a specified charge.
It is a shipping document indicating the details of the shipment and delivery of goods and their ownership. 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.
Black Market: An illegal market that often arises when price controls or official rationing lead to shortages of goods, services, or assets. Blank endorsement: The method whereby a bill of lading is made into a freely negotiable document of title. Blanket bond: A bond that coves a group of people, articles or properties. Blanket contracts: A long-term contract in which the supplier promises to re-supply the buyers as needed at agreed-upon prices over the contracting time.
Blocked Currency: A currency that is not freely convertible to other currencies due to exchange controls. Blocked funds: Cash flows generated by a foreign project that cannot be immediately repatriated to the parent firm because of capital flow restrictions imposed by the host government. Blue sky laws: State laws regulating the offering and sale of securities. Bond discount: The amount by which the face value of a bond exceeds its current price.
Bond equivalent yield: A bond quotation convention based on a day year and semiannual coupons. Contrast with effective annual yield. Bond premium: The amount by which the current price of a bond exceeds its face value. Bond: A long-term debt instrument issued by a corporation or government. 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. Bonded Warehouse: A warehouse authorized for storage of good on which payment of duty is deferred until the goods are removed from the warehouse.
A warehouse authorized by customs authorities for storage of goods on which payment of duties is deferred until the goods are removed. Boom-bust cycle: A pattern of performance over time in an economy or an industry that alternates between extremes of rapid growth and extremes of slow growth or decline, as opposed to sustained steady growth.
For an economy, this indicates an extreme form of the business cycle. Border price: The price of a good at a country's border. 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 it is often the negative of the net foreign asset position or the national debt. 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. 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.
Brady Bonds: New government securities issued under the Brady Plan whose interest payments were backed with money from the International Monetary Fund. Brady Plan: Plan developed by U. It gave banks the choice of either making new loans or writing off portions of their existing loans in exchange for Brady Bonds. Brain drain: The migration of skilled workers out of a country. Branch: A foreign operation incorporated in the home country.
Break-even analysis: Analysis of the level of sales at which a project would make zero profit. It is a technique for studying the relationship among fixed costs, variable costs, sales volume, and profits. Break-even chart: A graphic representation of the relationship between total revenues and total costs for various levels of production and sales, indicating areas of profit and loss.
Break-even point: The sales volume required so that total revenues and total costs are equal; may be expressed in units or in sales dollars. The U. Bribe: A payment made to person, often a government official such as a customs officer, to induce them to treat the payer favorably. 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 Foreign Direct Investment that involves the purchase of an existing plant or firm, rather then construction of a new plant.
It contrasts with green field investment. 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. 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. 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. 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. It is a function 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.
It involves buying a call at one strike price and selling another call at a higher strike price. 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 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 risk: The inherent uncertainty in the physical operations of the firm. Its impact is shown in the variability of the firm's operating income EBIT. Business-to-business B2B : Communications and transactions conducted between businesses, as opposed to between businesses and end customers. Expressed in alphanumeric form i. Cabotage: 1. Navigation and trade by ship along a coast, especially between ports within a country.
Restricted in the U. Air transportation within a country. Often restricted to domestic carriers, in an example of barriers to trade in services. Cairnes-Haberler Model: A trade model in which all factors of production are assumed immobile between industries. Call option: The right to buy the underlying currency at a specified price and on a specified date. It is a contract that gives the holder the right to purchase a specified quantity of the underlying asset at a predetermined price the exercise price on or before a fixed expiration date.
Call premium: The excess of the call price of a security over its par value. Call price: The price at which a security with a call provision can be repurchased by the issuer prior to the security's maturity. Call provision: A feature in an indenture that permits the issuer to repurchase securities at a fixed price or a series of fixed prices before maturity; also called call feature. Clause giving the borrower the option of retiring the bonds before maturity should interest rates decline sufficiently in the future.
Canonical model of currency crises: This term has been used to refer to the model that used for a currency crisis that results when domestic policy is pursued in a manner inconsistent with a pegged exchange rate. 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 financial structure: The proportion of debt and equity and the particular forms of debt and equity chosen to finance the assets of the firm. 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. It 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. 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. Same as 2 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. A measure of change in cross-border ownership of long-term financial assets, including financial securities and real estate.
It is the net results of public and private international investment and lending activities. 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.
It is an asset pricing model that relates the required return on an asset to its systematic risk. A model that describes the relationship between risk and expected required return; in this model, a security's expected required return is the risk-free rate plus a premium based on the systematic risk of the security. 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.
It is same as factor augmenting with capital the augmented factor. It is also called Solow neutral. Capital budgeting: The process of identifying, analyzing, and selecting investment projects whose returns cash flows are expected to extend beyond one year. Planning and managing expenditures for long-lived assets. 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 flight: The transfer of capital abroad in response to fears of political risk. Large financial capital outflows from a country prompted by fear of default or, especially, by fear of devaluation. Capital formation: The process of increasing the amount of capital goods - also called capital stock - in a country. Capital gain loss : The amount by which the proceeds from the sale of a capital asset exceeds is less than the asset's original cost. The positive change in the value of an asset, a negative capital gain is a capital loss.
The gain 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. It contrasts with capital loss. Capital good: A good, such as a machine, that, once in place, becomes part of the capital stock. It is 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 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.
A measure of the relative use of capital, compared to other factors such as labor, in a production process. It is often measured by the ratio of capital to labor, or by the share of capital in factor payments. Capital loss: The loss 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.
It contrasts with capital gain. Capital market imperfections: Distortions in the pricing of risk, usually attributable to government regulations and asymmetries in the tax treatment of different types of investment income. 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 market integration: The situation that exists when real interest rates are determined by the global supply and global demand for funds.
Capital market line: The line between the risk-free asset and the market portfolio that represents the mean-variance efficient set of investment opportunities in the CAPM. Capital market segmentation: The situation that exists when real interest rates are determined by local credit conditions. Capital market: The market for relatively long-term greater than one year original maturity financial instruments e.
The markets for financial assets and liabilities with maturity greater than one year, including long-term government and corporate bonds, preferred stock, and common stock. Capital mobility: The ability of capital to move internationally. It is recorded as negative, or a debit, in the balance on capital account. Capital productivity: The ratio of output goods and services to the input of physical capital plant and equipment.
Capital rationing: A situation where a constraint or budget ceiling is placed on the total size of capital expenditures during a particular period. It is the case where funds are limited to a fixed dollar amount and must be allocated among the competing projects. 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 structure: The mix of the various debt and equity capital maintained by a firm. It is also called financial structure. The composition of a corporation's securities used to finance its investment activities; the relative proportions of short-term debt, long-term debt, and owners' equity. It is the mix or proportion of a firm's permanent long-term financing represented by debt, preferred stock, and common stock equity.
Capital: 1. The plant and equipment used in production. One of the main primary factors, the availability of which contributes to the productivity of labor, comparative advantage, and the pattern of international trade. A stock of financial assets. Capitalism: An economic system that is based on private ownership; economic development is proportionate to and dependent upon the accumulation and reinvestment of profits.
Capitalization rate: The discount rate used to determine the present value of a stream of expected future cash flows. Capitalized expenditures: Expenditures that may provide benefits into the future and therefore are treated as capital outlays and not as expenses of the period in which they were incurred. Capital-saving: A technological change or technological difference that is biased in favor of using less capital, compared to some definition of neutrality. Capital-using: A technological change or technological difference that is biased in favor of using more capital, compared to some definition of neutrality.
Carrier: A firm that provides transportation of persons or goods. An individual or entity that transports persons or goods for compensation under the contract of carriage. Cartel: An agreement among, or an organization of, suppliers of a product. A group of firms that seeks to raise the price of a good by restricting its supply. Cascading tariffs: Same as tariff escalation. Cash Against Documents CAD : Payment for goods where a commission house or other intermediary transfers title documents to the buyer upon payment in cash.
Cash budget: A forecast of a firm's future cash flows arising from collections and disbursements, usually on a monthly basis. Cash concentration: The movement of cash from lockbox or field banks into the firm's central cash pool residing in a concentration bank. Cash cover: In a letter of credit transaction, money deposited by the applicant with the issuing bank. Cash cycle: The length of time from the actual outlay of cash for purchases until the collection of receivables resulting from the sale of goods or services; also called cash conversion cycle.
Cash discount period: The period of time during which a cash discount can be taken for early payment. It is an incentive for credit customers to pay invoices in a timely fashion. Cash dividend: Cash distribution of earnings to stockholders, usually on a quarterly basis.
Cash equivalents: Highly liquid, short-term marketable securities that are readily convertible to known amounts of cash and generally have remaining maturities of three months or less at the time of acquisition. Cash flow: Cash generated by the firm and paid to creditors and shareholders. It can be classified as 1 - cash flow from operations, 2 - cash flow from changes in fixed assets, and 3 - cash flow from changes in net working capital. Cash in Advance CIA : Payment for goods in which the price is paid in full before the shipment is made.
This type of payment is usually only made for very small shipments or when goods are made in order. It is the payment for goods prior to its shipment. Cash insolvency: Inability to pay obligations as they fall due.
Cash Pooling: Pooling. Central bank: The institution in a country or a currency area that is normally responsible for managing to supply of the country's money and the value of its currency on the foreign exchange market. 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. Centrally planned economy: An economy in which the government, rather than free-market activity, controls the allocation of resources.
Certainty equivalent CE : The amount of cash someone would require with certainty at a point in time to make the individual indifferent between that certain amount and an amount expected to be received with risk at the same point in time.
Certainty: Precise knowledge of an economic variable, as opposed to belief that it could take on multiple values. It contrasts with uncertainty. It is one aspect of complete information. Certificate of acceptance: Term used in leasing.
A document whereby the lessee acknowledges that the equipment to be leased has been delivered, is acceptable, and has been manufactured or constructed according to specifications. Certificate of manufacture: A statement that is usually notarized in which the producer of goods certifies that the goods have been produced and are now available to the buyer.
Certificate of origin: Documents that may be asked for by the authorities of the importing country, as evidence of the country of manufacture of the goods. Certificate of product origin: A document required by certain foreign countries for tariff purpose, certifying the country of origin of specified goods.
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. 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 net working capital: Difference between net working capital from one period to another.
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. Characteristic line: The line relating the expected return on a security to different returns on the market.
It is a line that describes the relationship between an individual security's returns and returns on the market portfolio. The slope of this line is beta. Chattel mortgage: A lien on specifically identified personal property assets other than real estate backing a loan.
Chicago Mercantile Exchange CME : The largest market in the world for trading standardized futures and options contracts on a wide variety of commodities, including currencies and bonds. 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.
It means that a price includes the various costs, such as transportation and insurance, needed to get a good from one country to another. It contrasts with FOB. 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. Classical: Referring to the writings, models, and economic assumptions of the first century of economics, including Adam Smith, David Ricardo, and John Stuart Mill.
Clayton Act: A federal antitrust law designed to promote competition that addresses several antitrust matters, including interlocking directorates, race discrimination, exclusive dealing, and mergers. Clean bill of lading: A receipt for goods issued by a carrier that indicates that the goods were received in apparently good order and without damage.
Clean collection: Collection in which only the financial document is sent through the banks. Clean Draft: A draft unaccompanied by any other papers; it is normally used only for nontrade remittances. Clean Float: Free float. Cleanup Clause: A clause inserted in a bank loan requiring the company to be completely out of debt to the bank for a period of at least 30 days during the year. 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.
Clearance: The completion of customs entry requirements that results in the release of goods to the importer. An automated clearing system used primarily for international payments. 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 economy: An economy that does not permit economic transactions with the outside world; a country in autarky.
Closed-end fund: A mutual fund in which the amount of funds under management is fixed and ownership in the funds is bought and sold in the market like a depository receipt. 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. Coefficient of variation CV : The ratio of the standard deviation of a distribution to the mean of that distribution.
It is a measure of relative risk. Collection order: In a collection, the document in which the seller instructs the banks as to how the collection is to be conducted. 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. Collectivist society: A society in which people feel more comfortable thinking and acting in groups. Collusion: Cooperation among firms to raise price and otherwise increase their profits.
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 document: General term for documents describing various aspects of a transaction, e.
Commercial Invoice: A document that contains an authoritative description of the merchandise shipped, including full details on quality, grades, price per unit, and total value, along with other information on terms of the shipment. Commercial Paper CP : A short-term unsecured promissory note that is generally sold by large corporations on a discount basis to institutional investors and to other corporations.
It is a short-term, unsecured promissory notes generally issued by large corporations unsecured corporate IOUs. It is a 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 Nontariff barrier , as well as policies regarding exports. Commitment fee: A fee charged by the lender for agreeing to hold credit available. 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 price risk: The risk of unexpected changes in a commodity price, such as the price of oil. Commodity prices: Usually means the prices of raw materials and primary products. Commodity swap: A swap in which the, often notional, principal amount on at least one side of the swap is a commodity such as oil or gold. 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.
Common Agricultural Policy CAP : 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 carrier: An organization that transports persons or goods for a fee.
Common currency: A currency that is shared by more than one country. Thus it is 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.
It is equivalent to a customs union plus free mobility of factors. Common stock: Securities that represent the ultimate ownership and risk position in a corporation. Common tangent: A straight line that is tangent to two or more curves. Used in the Lerner diagram. Common-size analysis: An analysis of percentage financial statements where all balance sheet items are divided by total assets and all income statement items are divided by net sales or revenues.
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.
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. 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.
A comparative advantage exists when a nation or economic region is able to produce a product at a lower opportunity cost compared to another nation or region. The rule of economics that states: Each country should specialize in producing those goods that it is able to produce relatively most efficiently. Comparative static: Refers to a comparison of two equilibriums 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 balance: Demand deposits maintained by a firm to compensate a bank for services provided, credit lines, or loans. 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 that tax winners in order to compensate losers, then it is viewed as beneficial even when those transfers do not occur.
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. It is same as willingness to pay.
It contrasts with equivalent variation. Compensation trade: Counter trade, including especially payment for foreign direct investment out of the proceeds from that investment. Compensation: 1. 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. 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. It is called anti-trust policy in the U. 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.
Competitive advantage: Competitiveness. It contrasts with comparative advantage. Competitive: Used alone, this usually means perfectly competitive. It contrasts with imperfectly competitive. Competitiveness: Usually refers to characteristics that permit a firm to compete effectively with other firms due to low cost or superior technology, perhaps internationally. 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. Production only of goods that are exported or no traded, but none that compete with imports. Production of only one good. Being the only country in the world to produce a good. Compliant documents: Documents presented under a letter of credit that comply with all its terms and conditions.
The banks are only obliged to pay the beneficiary if documents are totally compliant. 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. Compound interest: Interest paid earned on any previous interest earned, as well as on the principal borrowed lent.
It is earned both on the initial principal and on interest earned on the initial principal in previous periods. The interest earned in one period becomes in effect part of the principal in a following period. Compound tariff: A tariff that combines both a specific and an ad valorem component. Compound value: Value of a sum after investing it over one or more periods.
It is also called future value. Compounding: Process of reinvesting each interest payment to earn more interest. Compounding is based on the idea that interest itself becomes principal and therefore also earns interest in subsequent periods. 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. 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.
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. It is also called the concertina rule. This is known to raise welfare if all goods are net substitutes.
Concession Agreement: An understanding between a company and the host government that specifies the rules under which the company can operate locally. Concession: The term used in GATT General Agreement on Tariffs and Trade 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 beneficial act, 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. Conditional sales contract: A means of financing provided by the seller of equipment, who holds title to it until the financing is paid off. 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.
Confirming bank: Bank that adds its payment undertaking to a letter of credit. 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.
Consignee: Party to whom goods are to be delivered. Consignment: Delivery of merchandise from an exporter i. Under this selling method, goods are only shipped, but not sold, to the importer. The exporter consignor retains title to the goods until the importer consignee has sold them to a third party. This arrangement is normally made only with a related company because of the large risks involved. 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.
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. Consol: A bond that never matures; a perpetuity in the form of a bond. Consolidation: The combination of two or more firms into an entirely new firm. The old firms cease to exist. Though technically different, the terms merger where one firm survives and consolidation tend to be used interchangeably.
It is a form of corporate reorganization in which two firms pool their assets and liabilities to form a new company. Constant dollars: Dollars of constant purchasing power. That is, corrected for inflation. More precisely includes reference to a base year for comparison, e. It is same as constant prices. Constant elasticity of transformation function: A function representing an economy's transformation curve along which the elasticity of transformation is constant.
Constant returns to scale CRTS : 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 international trade. It contrasts with increasing returns and decreasing returns. Consular Invoice: An invoice, which varies in its details and information requires from nation to nation, that is presented to the local consul in exchange for a visa. Consular statement: A document required by some foreign countries, describing a shipment of goods and showing information such as the consignor, consignee, and value of shipment. Certified by a consular official of the foreign country, it is used by the country's officials to verify the value, quantity, and nature of the shipment.
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.
It contrasts with the implicit price deflator. Consumer support estimate CSE : Introduced by the OECD Organization for Economic Co-operation and Development 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. 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. It is normally useful only as the change in consumer surplus. Consumption externality: An externality arising from consumption. 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.
It is 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. Contingency insurance: Contingency insurance protects the exporter in any situation in which exporter responsibility relied on the buyer to insure, but sustained a loss because of inadequate coverage from that source. It will cover situations in which the FOB endorsement would have otherwise served had that been in force.
Contingent claim: Claim whose value is directly dependent on, or is contingent on, the value of its underlying assets. For example, the debt and equity securities issued by a firm derive their value from the total value of the firm. Continuous compounding: Interest compounded continuously, every instant, rather than at fixed intervals. Continuous quotation system: A trading system in which buy and sell orders are matched with market makers as the orders arrive, ensuring liquidity in individual shares.
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. Contract curve 1. In an Edgeworth Box for consumption, the allocations of 2 goods to 2 consumer 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. In an Edgeworth Box for production, this name is sometimes also used for the efficiency locus. Contract manufacturing: A firm allowing another firm to manufacture a pre-specified product. The term Contracting Parties with both words capitalized means all Contracting Parties acting jointly.
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. It contrasts expansionary. Contribution margin: Amount that each additional product, such as a jet engine, contributes to after-tax profit of the whole project. Controlled disbursement: A system in which the firm directs checks to be drawn on a bank or branch bank that is able to give early or mid-morning notification of the total dollar amount of checks that will be presented against its account that day.
In the U. 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. Conversion price: The price per share at which common stock will be exchanged for a convertible security. It is equal to the face value of the convertible security divided by the conversion ratio.
Conversion ratio: The number of shares of common stock into which a convertible security can be converted. It is equal to the face value of the convertible security divided by the conversion price. Conversion value: The value of the convertible security in terms of the common stock into which the security can be converted. It is equal to the conversion ratio Verdana the current market price per share of the common stock. Convertible bonds: Fixed-rate bonds that are convertible into a given number of shares prior to maturity.
Bonds sold with a conversion feature that allows the holder to convert the bond into common stock on or prior to a conversion date and at a pre-specified conversion price. Convertible currency: A currency that can be traded for other currencies at will. 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.
Convertible security: A bond or a preferred stock that is convertible into a specified number of shares of common stock at the option of the holder. Convex tax schedule: A tax schedule in which the effective tax rate is greater at high levels of taxable income than at low levels of taxable income.
Such a schedule results in progressive taxation. Copenhagen Criteria: The rules and regulations that all applicant countries to the European Union must meet, and to which all EU member nations must maintain. Core inflation: The rate of inflation excluding certain sectors whose prices are most volatile, specifically food and energy.
Core propositions: The core propositions are the factor price equalization theorem Corporate culture: The set of values, beliefs, relationships between individuals and functions that guide the decisions of a company to achieve its objectives.
Corporate governance: The system by which corporations are managed and controlled. It encompasses the relationships among a company's shareholders, board of directors, and senior management. The way in which the major stakeholders exert control over the modern corporation.
The means whereby companies are controlled. 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 restructuring: Any change in a company's capital structure, operations, or ownership that is outside its ordinary course of business.
Corporate social responsibility: The responsibilities that corporations, including MNCs, have to workers and their families, to consumers, to investors, and to the natural environment. Corporation: Form of business organization that is created as a distinct legal person composed of one or more actual individuals or legal entities.
Primary advantages of a corporation include limited liability, ease of ownership, transfer, and perpetual succession. A business form legally separate from its owners. Its distinguishing features include limited liability, easy transfer of ownership, unlimited life, and an ability to raise large sums of capital.
Correlation coefficient: A standardized statistical measure of the linear relationship between two variables. Its range is from Correlation: A measure of the covariability of two assets that is scaled for the standard deviations of the assets. Correspondent bank: A bank that, in its own country, handles the business of a foreign bank.
A bank located in any other city, state, or country that provides a service for another bank. Corruption perceptions index CPI : A ranking of countries by level of corruption that is researched and published by Transparency International TI , the world's leading non-governmental organization dedicated to fighting corruption. 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 likely a comparative advantage. Cost and Freight: A pricing term that indicates that the cost of the goods and freight charges are included in the quoted price. Cost function: A function relating the minimized total cost in a firm or industry to output and factor prices.
Cost of capital: The required rate of return on the various types of financing. The overall cost of capital is a weighted average of the individual required rates of return costs. Cost of debt capital: The required rate of return on investment of the lenders of a company. Cost of equity capital: The required rate of return on investment of the common shareholders of the company.
It is the required return on the company's common stock in capital markets. It is also called the equity holders' required rate of return because it is what equity holders can expect to obtain in the capital market. It is a cost from the firm's perspective. It equals a basic yield covering the time value of money plus a premium for risk. How to cite. This is a preview of subscription content, log in to check access. Clarke, T. International corporate governance: A comparative approach.
London: Routledge. Google Scholar. Greenbury Committee. London: Gee. High Pay Commission. Cheques with balances: Why tackling high pay is in the national interest. Final report of the high pay commission. London: High Pay Commission. Hughes, J. International Journal of Manpower, 17 1 , 4—9. Mallin, C.
|Fsa spread betting guidelines synonym||Adverse selection: The possibility that fsa spread betting guidelines synonym the highest-risk customers will seek insurance. Dealing desk trading desk : The desk at an international bank that trades spot and forward foreign exchange. Typically, an importer with a future commitment fsa spread betting guidelines synonym 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. The percentage cost of a financing alternative, including any bank fees or placement fees. Certified by a consular official of the foreign country, it is used by the country's officials to verify the value, quantity, and nature of the shipment. The aval is an endorsement note as opposed to a guarantee agreement. The index for any year is the average of prices for that year compared to the base year; e.|
|7 card stud poker betting tips||Cash budget: A forecast of a firm's future cash flows arising from collections and disbursements, usually fsa spread betting guidelines synonym a fsa spread betting guidelines synonym basis. Hughes, J. Balloon payment: A payment on debt that is much larger than other payments. Cash insolvency: Inability to pay obligations as they fall due. 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. Broker's fee: The fee for a transaction charged by an intermediary in a market, such as a bank in a foreign-exchange transaction.|
|Betting my chips are soggy||Contract curve 1. As a basis for welfare comparisons, the idea that if a policy change such as a tariff reduction could be Pareto improving if fsa spread betting guidelines synonym were accompanied by appropriate lump-sum transfers that fsa spread betting guidelines synonym winners in order to compensate losers, then it is viewed as beneficial even when those transfers do not occur. FSA 52 places any imbalance into an equity account called the cumulative translation adjustment. Countertrade: The sale of goods or services that are paid for in whole or part by the transfer of goods or services from a foreign country. It is equal to the conversion ratio Verdana the current market price per share of the common stock. Opposite of depreciation. Bid-ask spread: The difference between the buying and selling rates.|
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|Labrouche betting tips||Convertible bonds: Fixed-rate bonds that are convertible into fsa spread betting guidelines synonym given number of shares prior to maturity. Includes FDI, plus changes in private and fsa spread betting guidelines synonym holdings of stocks, bonds, loans, bank accounts, and currencies. They also exchange interest rate payments in the two currencies. Relative capital abundance can be defined by either the quantity definition or the price definition. Cover: To use the forward market to protect against exchange risk. Black markets in foreign exchange almost always exist when there are exchange controls.|
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Spread betting is a leveraged product which means investors only need to deposit a small percentage of the position's value. To learn more, see: Margin. For further reading, see: Understanding Financial Spread Betting. Trading Instruments. Your Money. Personal Finance. Your Practice. Popular Courses. What is Spread Betting? Key Takeaways Spread betting refers to speculating on the direction of a financial market without actually owning the underlying security. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation.
Related Terms Futures Futures are financial contracts obligating the buyer to purchase an asset or the seller to sell an asset at a predetermined future date and price. Forex Spread Betting Definition Forex spread betting allows speculation on the movements of the selected currency without actually transacting in the foreign exchange market. Position A position is the amount of a security, commodity or currency which is owned by an individual, dealer, institution, or other fiscal entity.
Some bookies are also wary of clients who use automated day-trading computer programmes. And even bookies who gamble in their spare time are not immune to such treatment. With the benefit of hindsight, the firm in question, which Armitage declined to name, might have made a different decision regarding whether or not to maintain the IG bookie's account.
Stop losses are the typical way punters limit their downside risk on spread bets. Many firms strongly encourage their customers to use stop losses; the two most commonplace forms are the classic stop order, which closes out a position if a price drops or rises beyond a specified level, and a trailing stop order, where the stop is defined more dynamically.
Competition among firms has led to severe margin compression. Currency trades, for example, now often have a bid-offer spread of just three points, while the spread on FTSE-related bets might be just two points. Firms are therefore trying to differentiate themselves from their competitors by other means - by improving their electronic platforms, or by offering a wider range of instruments.
For example, many firms have traditionally refused to make markets in the shares of companies with small market capitalisations, as it can be difficult for them to lay off the risk. Man is one of the firms carving out a niche in the small-cap space. IG, meanwhile, is seeing some client demand in another area where competition is less intense - namely derivatives. By way of example, a UK-based professional footballer who has an account with IG recently put on what Armitage describes as a fairly complex trade involving spread bets on eurodollar interest rate futures and options.
He declined to name the football player, citing client confidentiality. Although clients are increasingly trading different underlyings, most continue to focus on equities, currencies and to a lesser extent, interest rates. Firms are loath to disclose spread betting volume figures, but one of the leading bookies says that on a very busy day - for example, around the time of a major US economic release, such as the monthly payroll figures - it can turn over bets per minute during peak activity.
One way some of these firms cut costs is by hedging less and taking a lot more proprietary risk. IG doesn't hedge everything, but "doesn't sit back and do nothing" either, says Armitage. It runs limits in every market it quotes - typically in terms of volumes and volatility - and has a risk committee. When other firms undercut its spreads, IG Index will often match them, to "try and squeeze them out", as Armitage puts it. When times are good it can be fine, but when the herd of punters gets it right, as they occasionally do, it can be very painful," he cautions.
However, since the release of a regulatory discussion paper in May, a challenge beyond their own control has been causing firms great worry. Separately, the FCA has also recently been involved in another spread betting controversy regarding allegations of market abuse see box. An important part of new legislation relates to best execution and the use of benchmarking to achieve it. UK spread betting firms currently have a waiver from best execution rules, but according to the FCA this won't continue post-Mifid.
The bottom line of the FCA's suggested benchmarking method for spread betting firms is that clients "should not receive a price that is in any way less favourable than if the firm were to acquire the underlying financial instruments seeking to obtain the best possible result on a consistent basis", the FCA says. According to GFT's Slaney, it would be difficult in practice to implement a benchmarking approach, and any attempt to do so will stifle the industry's creativity.
IG Index's Armitage is similarly peeved. Clients appreciate that firms make their own prices, says Slaney. I have just finished reading a report recently that Hargreaves Lansdown have decided to enter the spread betting and CFD world after signing an agreement with IG. The two media reports I have read have lamented over how such a responsible investment house such as Hargreaves Lansdown could compromise their clients by offering them leveraged trading.
One chap commented thus on a story carried in Money Marketing, "so Hargreaves Lansdown don't like structured products but they are willing to take a financial 'cut' and let people lose money with IG off CFDs and spread betting gambling with a fancy name. How long before one of those cases ends up in the personal finances pages accompanied by a picture of the victim's tearful grandchildren. What baffles me is the underlying assumption that spread betting is some kind of poison seeping in the gutters of the investment industry.
What also baffles me is how English calls Hargreaves clients 'avid investors' in one breath, and yet in his next, suggests they will lose their fortunes in a new and ill-understood investment! If these people are so well informed then I am sure they will have heard of, or even experienced, spread betting and CFD trading as a form of investment.
I believe we should give the good clients at Hargreaves Lansdown more credit than they are currently being afforded. Anyone willing to invest their fortunes in ISAS and SIPPs are already showing a certain form of risk profile, and it is exactly because of that that I believe they will take a sober approach to this spread betting offer. Spread betting, when done properly, is highly rewarding. Give the Hargreaves investors a chance - they could yet prove spread betting is not gambling with a fancy name.
Spread betting firms are also attracting a lot of foreign interest, particularly from Europe, and also from Australia, which in turn is becoming the base of choice for establishing offices to spearhead expansion into the Far East, with its time zone fit, and lack of language barrier.
Another hot spot is Dubai where the property and equity markets have boomed. Overseas investors show signs of following the UK pattern, still predominately trading indices and main markets like the US. Chris Spark at Finspreads, said: "The internet has really made it easier for expats. It cuts down on paperwork and saves time. The international market is really in its infancy but its growth is a formality rather than a possibility.
The rules are pretty murky for those outside the UK.