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absolute poverty
living conditions under which basic human necessities like food, clean drinking water, sanitation, and shelter are not met
the centralization of political power in the hands of the monarch in Western Europe during the 17th and 18th centuries
the idea that human beings are the most important component of the universe
balance of payment
in a given period, the difference in value between all payments made to a country and the payments the country has made to the rest of the world
balance of trade
in a given period, the difference between the value of exports and imports in a country
capital flight
the large-scale exit of money from a country as a result of market uncertainty, decreased investments, unemployment, and economic contraction
capital mobility
the ability investors have to move capital from one country to another
Cold War
a period of geopolitical tension between the two world powers at the time, the United States and the Union of Soviet Socialist Republics, from after World War II until the late 1980s
competitive devaluation
the devaluation of a country’s currency in relation to other countries’ currencies followed by other countries’ devaluation of their currencies
conditions attached to IMF loans prescribing the policy actions a country agrees to take in exchange for the loans
voting members of a community
debt crises
situations in which governments are unable to pay their debts
a decrease in economic production and consumption levels
environmental regulations
the body of taxes and tariffs, quotas, subsidies, and regulations governments issue to promote environmental protection
environmental, social, and governance (ESG)
standards investors use to screen potential investments; environmental criteria describe a company’s performance as a steward of nature, social criteria report the company’s relationships where it operates, and governance is associated with executive pay, internal controls, and shareholder rights
exchange rate
the price of a currency against the value of another currency, basket of currencies, or gold
financial integration
the process that connects financial markets all over the world
fixed (pegged) exchange rate
situation in which the value of a currency is fixed against the value of another currency, basket of currencies, or gold
floating (flexible) exchange rate
situation in which the supply and demand of a currency in the market determine its value
foreign direct investment (FDI)
a company’s investment in a business based in another country
General Agreement on Tariffs and Trade (GATT)
legal agreement signed on October 30, 1947, by 23 countries to reduce international trade barriers through the elimination or reduction of quotas, tariffs, and subsidies in some sectors while preserving regulations in others
gold standard
the monetary system in which the standard unit of account is a fixed quantity of gold
Great Depression
the severe financial crisis sparked by the 1929 stock market crash in New York that led to bank closures and high unemployment
gross domestic product (GDP)
sum of everything produced in a country in a given period
international financial institutions
institutions established by several governments to regulate international finance issues, such as trade and investments
international liquidity
the amount of money or gold available in the international market
International Monetary Fund (IMF)
international institution with 190 member countries that promotes international financial stability and monetary cooperation, facilitates international trade, promotes employment and sustainable economic growth, and helps to reduce global poverty
international political economy (IPE)
field of study occupied with the investigation of political processes and their economic consequences, which have both domestic and international impacts
International Trade Organization (ITO)
proposed international institution for the regulation of trade in the Bretton Woods conference; was never established
knowledge institution
the World Bank’s role as an institution that collects and publishes data and reports
free-market approach in which governments do not interfere in the market and let things take their own course
Marshall Plan
war recovery program through which the United States provided USD 26 billion between 1946 and 1949 to European countries and Japan to assist in the war recovery
an economic theory based on capital accumulation, or the increase of wealth, which according to mercantilists can be achieved through trade and protectionist policies
Millennium Development Goals (MDGs)
a set of eight goals agreed to by all the world’s countries and all the world’s leading development institutions to halve extreme poverty rates, halt the spread of HIV/AIDS, and provide universal primary education by the year 2015
modernization theory
theoretical model to explain the transition from a traditional to a modern society
multilateral exchange rate
exchange rate regime in which governments allow their currencies to fluctuate within margins
non-tariff barriers
non-tariff barriers to international trade, such as regulations, including environmental regulations, that specify how a product can be manufactured, handled, or advertised or a quota that limits the amount of a certain product that can be imported to a market
oil shocks
shortages of oil and oil derivatives in the Western world that resulted from oil-exporting countries’ decision to reduce oil production
plurilateral agreements
agreements between a small number of GATT member states in the 1970s
political factors
domestic and international components of politics and the policy-making process that result in specific public policies
protectionist policies
restrictions on imports by means of tariff and non-tariff barriers
the belief that reason rather than experience is the foundation of knowledge
money, gold, and other highly liquid assets that a country’s central bank or other monetary authority could dispose of to meet financial obligations
the view that inductive methods of the natural sciences are the only source of genuine knowledge
special drawing rights (SDR)
the IMF’s unit of account; SDRs represent a claim to currency held by IMF member countries for which they may be exchanged
payments or incentives the government grants to firms in the form of cash payments or tax cuts
Sustainable Development Goals (SDGs)
17 global goals established in 2015 focused on achieving a better and more sustainable future for all by the year 2030
tariff concessions
removal or reduction of a tariff
trade rounds
meetings of GATT signatories in a series of multilateral negotiations to discuss international trade
Washington Consensus
a program designed by the IMF to promote economic stability in borrowing countries and increase the odds that the countries pay their debts
World Bank
international financial institution that provides loans and grants with the objective of promoting development
World Trade Organization
international institution that promotes and regulates trade between nations; member state governments rely on the organization to establish, revise, and enforce the rules that govern international trade
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