1. Navigation and trade by ship along a coast, especially between ports within a country. Restricted in the U.S. by the Jones Act to domestic shipping companies.
2. Air transportation within a country. Often restricted to domestic carriers, in an example of barriers to trade in services.
|CACM||Central American Common Market.|
|CAFTA||U.S.-Central American Free Trade Agreement.|
|Cairnes-Haberler Model||A trade model in which all factors of production are assumed immobile between industries. See specific factors model.|
|Cairns Group||A group of agricultural exporting countries, currently (2007) numbering 19, that was formed in 1986 to act as a counterweight especially to the EU in international negotiations on agriculture. Named after the city in Australia where the group first met, in August 1986.|
|Calibration||In economic models, particularly computable general equilibrium models, this refers to the assignment of values to parameters so as to align the model with real-world data.|
|CAN||Comunidad Andina (Spanish for Andean Community)|
|Canada-US Auto Pact||The "Canada-United States Automotive Products Agreement of 1965" which reduced trade barriers on specified trade between Canada and the United States in automobiles and original-equipment auto parts.|
|Canada-US Free Trade Agreement||A free trade agreement between Canada and the United States signed in 1989 and superseded by the NAFTA in 1994.|
|Cancún Ministerial||The 5th ministerial meeting of the WTO held in Cancún, Mexico, September 2003 as part of the Doha Round of multilateral trade negotiations. The meeting failed to reach agreement on a framework text for the round because of disagreements between the US/EU and the G-20, mostly over agricultural subsidies.|
|Canonical model of currency crises||This term has been used to refer to the model that Krugman (1979) presented of a currency crisis that results when domestic policy is pursued in a manner inconsistent with a pegged exchange rate.|
|CAP||Common Agricultural Policy|
|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.|
1. The plant and equipment used in production.
2. One of the main primary factors, the availability of which contributes to the productivity of labor, comparative advantage, and the pattern of international trade.
3. A stock of financial assets.
|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.|
1. (Current definition) Since sometime in the 1990s, "capital account" 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.
2. (Common definition) 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.
3. (Bretton-Woods definition) Same as common definition 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.
|Capital account balance||Balance on capital account|
|Capital account deficit||Debits minus credits on capital account. See deficit.|
|Capital account surplus||Credits minus debits on capital account. Same as balance on capital account. See surplus.|
|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.|
|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. Same as factor augmenting with capital the augmented factor. Also called Solow neutral.|
|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 depreciation||See depreciation.|
|Capital flight||Large financial capital outflows from a country prompted by fear of default or, especially, by fear of devaluation.|
|Capital flow||International capital movement.|
|Capital gain||The increase 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. Contrasts with capital loss.|
|Capital good||A good, such as a machine, that, once in place, becomes part of the capital stock.|
|Capital inflow||A net flow of capital, real and/or financial, into a country, in the form of increased purchases of domestic assets by foreigners and/or reduced holdings of foreign assets by domestic residents. 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 intensity||A measure of the relative use of capital, compared to other factors such as labor, in a production process. Often measured by the ratio of capital to labor, or by the share of capital in factor payments.|
|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. See factor intensity.|
|Capital-labor ratio||The ratio of the quantity of capital (usually only physical) to the quantity of labor, usually as employed in a particular industry, but sometimes referring to the entire factor endowment of a country.|
|Capital loss||The decrease 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. Contrasts with capital gain.|
|Capital market imperfection||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 mobility||The ability of capital to move internationally. The degree of capital mobility depends on government policies restricting or taxing capital inflows and/or outflows, plus the risk that investors in one country associate with assets in another.|
|Capital movement||Capital inflow and/or outflow.|
|Capital outflow||A net flow of capital, real and/or financial, out of a country, in the form of reduced holdings of domestic assets by foreigners and/or increased holdings of foreign assets by domestic residents. Recorded as negative, or a debit, in the balance on capital account.|
|Capital output ratio||The ratio of the quantity of capital to the quantity of output, usually in the one-sector economy of a simple growth model.|
|Capital-saving||A technological change or technological difference that is biased in favor of using less capital, compared to some definition of neutrality.|
|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-using||A technological change or technological difference that is biased in favor of using more capital, compared to some definition of neutrality.|
|Capitalism||An economic system in which capital is mostly owned by private individuals and corporations. Contrasts with communism.|
1. An owner (or sometimes only a manager) of capital.
2. Associated or identified with capitalism.
|Caribbean Basin Initiative||A preferential trading arrangement originally enacted in 1983 by the United States, providing duty-free access to a group of Caribbean countries for selected products. It was renewed and extended in 2000.|
|Caribbean Community||The Caribbean Community and Common Market was formed among four Caribbean countries in 1973 and had 15 members as of 2007. Its purpose is the promotion of economic integration among the member countries and coordination of foreign policies.|
|CARICOM||Caribbean Community and Common Market.|
|Carriage of Goods by Sea Act||U.S. legislation governing ocean transport of cargo.|
|Carrier||A firm that provides transportation of persons or goods.|
|Carry trade||The practice of borrowing in the currency of a country where interest rates are low and lending the proceeds in the currency of a country where interest rates are higher, in hopes of profiting from the difference. Success depends on exchange rates remaining relatively constant. Also known as uncovered interest arbitrage.|
|Cartagena Agreement||The 1969 agreement, also known as the Andean Pact, that led ultimately to the Andean Community.|
|Cartel||A group of firms or countries that seeks to raise the price of a good by restricting its supply. The term is usually used for international groups, especially involving state-owned firms and/or governments.|
|Cascading tariffs||Same as tariff escalation.|
|CBI||Caribbean Basin Initiative|
|CCCN||Customs Cooperation Council Nomenclature|
|Cecchini Report||A 1988 report by a group of experts, chaired by Paolo Cecchini, examining the benefits and costs of creating a single market in Europe, in accordance with provisions of the Treaty of Rome.|
|CEEC||Central and Eastern European countries.|
|CEFTA||Central European Free Trade Agreement.|
|Ceiling||See price ceiling.|
|Central American Common Market||A group of Central American countries -- El Salvador, Guatemala, Honduras, and Nicaragua -- that formed a common market in 1960, with Costa Rica added in 1962. It largely disintegrated in the 1970s and 80s due to military conflicts, but reformed as the Central American Free Trade Zone (but without Costa Rica) starting in 1993.|
|Central and Eastern European countries||Refers, informally, usually to the former Communist countries of Europe.|
|Central bank||The institution in a country (or a currency area) that is normally (but see currency board) responsible for managing the supply of the country's money and the value of its currency on the foreign exchange market.|
|Central bank intervention||See exchange market intervention.|
|Central bank reserves||International reserves.|
|Central European Free Trade Agreement||A free trade agreement initiated 1993 among the Czech Republic, Hungary, Poland, Slovakia, and Slovenia, now also including Bulgaria and Romania. Its purpose was in part to reverse the bias against trade among these neighboring countries that had developed during the process of transition.|
|Central Intelligence Agency||Intelligence gathering (and espionage) agency of the United States government, publisher of the World Fact Book.|
|Central parity||Par value.|
|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.|
|CEPAL||Comision Economica para America Latina y el Caribe (Spanish for Economic Commission for Latin America and the Caribbean.|
|CER||Australia-New Zealand Closer Economic Relations Trade Agreement.|
|Certainty||Precise knowledge of an economic variable, as opposed to belief that it could take on multiple values. Contrasts with uncertainty. One aspect of complete information.|
|CES Function||A function with constant elasticity of substitution. CES is popular for both production and utility functions. Used extensively in New Trade Theory as the Dixit-Stiglitz utility function for differentiated products under monopolistic competition. With arguments X = (X1,...,Xn), the function is F(X) = A[SiaiXir]1/r, where ai, A are positive constants and s = 1/(1-r) is the elasticity of substitution. Due to Arrow et al. (1961).|
|CET function||Constant elasticity of transformation function.|
|Ceteris paribus||Latin phrase meaning, approximately, "holding other things constant." Used as shorthand for indicating the effect of one economic variable on another, holding constant all other variables that may affect the second variable. Contrasts with mutatis mutandis.|
|CGE||Computable general equilibrium.|
|Chaebol||A form of large business in South Korea, a conglomerate consisting of many companies centered around a parent company. They are family controlled and have strong ties to government. They are similar to the keiretsu of Japan, except that the chaebol do not own banks.|
|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.g., by relative unit labor requirements in the Ricardian model). 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 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.|
1. In NAFTA, this portion deals with foreign direct investment. Most controversially, it includes a provision for a firm from one member country that has invested in another to bring action against a unit of government in that country if it has acted to reduce the value of its investment.
2. A portion of U.S. bankruptcy law under which a firm can file for protection while it reorganizes.
|CHF||Acronym for the currency of Switzerland, the Swiss franc, standing for Confderatio Helvetica Franc.|
|Chicken War||A trade dispute between the U.S. and the EEC that began in 1962 when the EEC extended the variable levy of the CAP to poultry, tripling German tariffs on U.S. chickens. A GATT panel quantified the damage and led to U.S. retaliatory tariffs on cognac, trucks, and other goods. The U.S. 25% tariff on trucks today is a remnant of the chicken war.|
1. Employment of children under a specified minimum age.
2. Work that harmful to a child's physical or mental health, development, or education, and that is therefore targeted for elimination by labor standards.
|Chinese Economic Area||Unofficial name for the area comprising Hong Kong, Taiwan, and either China as a whole or just its Special Economic Zones.|
1. Cash in advance
2. Central Intelligence Agency
|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.i.f.). It means that a price includes the various costs, such as transportation and insurance, needed to get a good from one country to another. Contrasts with FOB.|
|CIS||Commonwealth of Independent States|
|CITES||Convention on International Trade in Endangered Species of Wild Fauna and Flora, an agreement among originally 80 governments effective in 1975 to prevent trade in wild animals and plants from threatening their survival. It works by requiring licensing of trade in covered species.|
|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.|
|Civil society organization||Non-governmental organization|
|Classical||Referring to the writings, models, and economic assumptions of the first century of economics, including Adam Smith, David Ricardo, and John Stuart Mill.|
|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.|
|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 currency position||A commitment to take or make delivery of a currency in the future that is covered by a contract in the forward market; opposite of an open position.|
|Closed economy||An economy that does not permit economic transactions with the outside world; a country in autarky.|
|Closer Economic Relations||See Australia-New Zealand Closer Economic Relations Trade Agreement.|
|CMEA||Council for Mutual Economic Assistance|
|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. Due to Coase (1960).|
|Cobb-Douglas function||A popular functional form for production and utility functions. With arguments X = (X1,...,Xn), the function is F(X) = APiXiai, where Siai = 1 and A are positive constants. This function has elasticity of substitution between arguments equal to one. As a production or utility function, it has competitive expenditure shares equal to ai.|
|Codex Alimentarius||This is the "food code," consisting of standards, codes of practice, guidelines, and recommendations for producing and processing food. It is administered by the Codex Alimentarius Commission.|
1. A number or symbol multiplied by a variable.
2. In a regression analysis, the estimated numerical association between one variable and another, usually taken to represent the sign and size of the causal effect of one on the other.
|COGSA||Carriage of Goods by Sea Act.|
|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.|
|Collusion||Cooperation among firms to raise price and otherwise increase their profits.|
|COMECON||Council for Mutual Economic Assistance|
|COMESA||Common Market of Eastern and Southern Africa|
|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 paper||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, as well as policies regarding exports.|
|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).|
|Commodity agreement||See international commodity agreement.|
|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 prices||Usually means the prices of raw materials and primary products.|
|Common Agricultural Policy||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 currency||A currency that is shared by more than one country. Thus 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. Equivalent to a customs union plus free mobility of factors.|
|Common Market of Eastern and Southern Africa||A trade agreement involving 21 nations of Eastern and Southern Africa. It went into effect in 1994, replacing a Preferential Trade Area that had begun in 1982, with the aim of forming a free trade area by 2000 and achieving other trade liberalization and transport facilitation over a period of 16 years.|
|Common tangent||A straight line that is tangent to two or more curves. Used in the Lerner diagram.|
|Commonwealth of Independent States||An organization formed in 1991 of the nations that had been part of the USSR.|
|Communism||An economic system in which capital is owned by government. Contrasts with capitalism.|
|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. See Leontief (1933).|
|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. The existence of well-behaved community preferences requires restrictive assumptions about individual preferences and/or incomes.|
|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. See also absolute advantage. Due to Ricardo (1815).|
|Comparative static||Refers to a comparison of two equilibria 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 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. Same as willingness to pay. Contrasts with equivalent variation.|
The GATT principle that members who violate GATT rules must compensate other countries by lowering tariffs or making other concessions, or be subject to retaliation.
2. 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.
|Compensation principle||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 from winners to losers, then it is viewed as beneficial even when those transfers do not occur.|
|Compensation trade||Countertrade, including especially payment for foreign direct investment out of the proceeds from that investment.|
|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.|
|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. Called "anti-trust policy" in the U.S. One of the Singapore Issues.|
|Competitive||Used alone, this usually means perfectly competitive. Contrasts with imperfectly competitive.|
|Competitive advantage||Competitiveness. Contrasts with comparative advantage.|
|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.|
1. Non-production of some of the goods that a country consumes, as in definition 2 of specialization.
2. Production only of goods that are exported or nontraded, but none that compete with imports.
3. Production of only one good.
4. Being the only country in the world to produce a good.
|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. Examples include the SDR and the ECU.|
|Compound tariff||A tariff that combines both a specific and an ad valorem component.|
|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. This is permitted by the TRIPs Agreement for certain purposes, such as protecting public health.|
|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.|
|Comvariance||An analogue to covariance for three variables. For three variables x, y, and z with values xi, yi, zi, i=1, ,n, the comvariance is com(x,y,z) = Si=1 n(xi-m(x))(yi-m(y))(zi-m(z)), where m(·) is the mean of the values in its argument. Due to Deardorff (1982).|
|Concave||Said of a curve that bulges away from some reference point, usually the horizontal axis or the origin of a diagram. More formally, a curve is concave from below (or concave to something below it) if all straight lines connecting points on it lie on or below it. Contrasts with convex.|
|Concentration||See industrial concentration.|
|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. Also called the concertina rule. This is known to raise welfare if all goods are net substitutes.|
|Concession||The term used in GATT 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 source of gain, 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.|
|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.|
|Cone of diversification||See diversification cone.|
|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. Due to Corden (1974).|
1. 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.
2.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."
|Constant dollars||Dollars of constant purchasing power. That is, corrected for inflation. More precisely includes reference to a base year for comparison, e.g. "in constant 1992 dollars." Same as constant prices.|
|Constant elasticity of substitution function||See CES function|
|Constant elasticity of transformation function||A function representing an economy's transformation curve along which the elasticity of transformation is constant.|
|Constant prices||See constant dollars.|
|Constant returns to scale||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 the H-O Model of international trade. Contrasts with increasing returns and decreasing returns.|
|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. Commonly used to measure inflation. Contrasts with the implicit price deflator.|
|Consumer support estimate||Introduced by the OECD 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. See also PSE.|
|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. Normally useful only as the change in consumer surplus.|
|Consumption externality||An externality arising from consumption.|
|Consumption function||The function relating aggregate consumption to aggregate income and sometimes other variables such as wealth.|
|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. 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.|
|Content protection||See domestic content protection.|
|Content requirement||See domestic content requirement.|
|Contingent protection||Administered protection.|
|Continuous time||The use of a continuous variable to represent time, as in an economic model.|
|Continuum model||A model in which some entities that are normally discrete and exist in finite numbers are modeled instead by a continuous variable. This can sometimes simplify the treatment of large numbers of entities. In trade theory, the most notable example is the continuum-of-goods model.|
|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. The classic, original examples are Dornbusch, Fischer, and Samuelson (1977, 1980).|
1. In an Edgeworth Box for consumption, the allocations of 2 goods to 2 consumers 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.
2. In an Edgeworth Box for production, this name is sometimes also used for the efficiency locus.
|Contracting party||A country that has signed the GATT. The term Contracting Parties with both words capitalized means all Contracting Parties acting jointly.|
|Contractionary||Tending to cause aggregate output (GDP) and/or the price level to fall. 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. Contrasts with expansionary.|
|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.|
|Convertible currency||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.|
1. Said of a curve that bulges toward some reference point, usually the horizontal axis or the origin of a diagram. More formally, a curve is convex from below (or convex to something below it) if all straight lines connecting points on it lie on or above it. Contrasts with concave.
2. Said of a set that contains all straight line segments joining points within it.
|Coordination||Cooperation in setting economic policy, especially across countries, so that policies of different governments reinforce each other rather than canceling each other out.|
|Copyright||The legal right to the proceeds from and control over the use of a created product, such a written work, audio, video, film, or software. This right generally extends over the life of the author plus fifty years. Copyright is one form of intellectual property that is subject of the TRIPS agreement.|
|Core inflation||The rate of inflation excluding certain sectors whose prices are most volatile, specifically food and energy.|
|Core propositions||The core propositions of the HO Model are the factor price equalization theorem, the Heckscher-Ohlin Theorem, the Stolper-Samuelson Theorem, and the Rybczynski Theorem, according to Ethier (1974).|
|Corn Laws||British regulations on the import and export of grain, mainly wheat, intended to control its price. The laws were repealed in 1846, signaling a shift toward free trade.|
|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 tax||Corporate income tax.|
|Correlation||A measure of the extent to which two economic or statistical variables move together, normalized so that its values range from -1 to +1. It is defined as the covariance of the two variables divided by the square root of the product of their variances. The correlation is used in trade theory to express weak relationships among economic variables.|
|Correlation result||A theoretical property of models with arbitrary numbers of goods or other variables that takes the form of a correlation among variables rather than a strict prediction for each one. Thus represents a weaker average relationship among the variables. Used for comparative advantage and other properties of trade models in higher dimensions.|
|Corruption||Dishonest or partial behavior on the part of a government official or employee, such as a customs or procurement officer. Also actions by others intended to induce such behavior, such as bribery or blackmail.|
|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 likeliy a comparative advantage.|
|Cost-benefit analysis||The use of economic analysis to quantify the gains and losses from a policy or program as well as their distribution across different groups in a society.|
|Cost function||A function relating the minimized total cost in a firm or industry to output and factor prices.|
|Cost, insurance, freight||See CIF.|
|Cotonou Agreement||A partnership agreement between the EU and the ACP Countries signed in June 2000 in Cotonou, Benin, replacing the Lomé Convention. Its main objective is poverty reduction, "to be achieved through political dialogue, development aid and closer economic and trade cooperation."|
|Council for Mutual Economic Assistance||An international organization formed in 1956 among the Soviet Union and other Communist countries to coordinate economic development and trade. It was disbanded in 1991. Also known as COMECON.|
|Countertrade||Trade in which part or all of payment is made in goods or services. See barter.|
|Countervailing duty||A tariff levied against imports that are subsidized by the exporting country's government, designed to offset (countervail) the effect of the subsidy.|
|Country of origin||The country in which a good was produced, or sometimes, in the case of a traded service, the home country of the service provider.|
|Country risk||The risk associated with operating in, trading with, or especially holding the assets issued by, a particular country. In the case of assets, country risk helps to explain why borrowers in some country must pay higher interest rates than borrowers from other countries, thus paying a country risk premium.|
|Country size||Any of many measures of the size of a country. For most economic comparisons, however, country size refers to GDP.|
|Coupon||The interest payment on a bond, so-named because bonds originally were pieces of paper with small sections, called coupons, that were cut off and exchanged for the interest payments.|
|Cournot competition||The assumption, often assumed to be made by firms in an oligopoly, that other firms hold their outputs constant as they themselves change behavior. Contrasts with Bertrand competition. Both are used in models of international oligopoly, but Cournot competition is used more often.|
|Cournot's law||That the sum of the balances of payments or of trade across all countries must be zero. Term seems to have been coined by, and perhaps only used by, Mundell (1960, p. 102), who credited it to Cournot (1897).|
|Court of International Trade||See U.S. Court of International Trade.|
|Covariance||A measure of the extent to which two economic or statistical variables move up and down together. For two variables x and y with values xi, yi, i=1, ,n, the covariance is cov(x,y) = Si=1 n(xi-m(x))(yi-m(y)), where m(·) is the mean of the values in its argument.|
|Cover||To use the forward market to protect against exchange risk. Typically, an importer with a future commitment to 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. See hedge.|
|Covered interest arbitrage||A combination of transactions on two countries' securities and exchange markets designed to profit from failure of covered interest parity. A typical set of transactions would include selling bonds in one market, using the proceeds to buy spot foreign currency and foreign bonds, and selling forward the return at a future date. See also one-way arbitrage.|
|Covered interest parity||Equality of returns on otherwise comparable financial assets denominated in two currencies, assuming that the forward market is used to cover against exchange risk. As an approximation, covered interest parity requires that i = i* + p where i is the domestic interest rate, i* is the foreign interest rate, and p is the forward premium.|
|Covered interest rate||The covered interest rate, in a currency other than your own, is the nominal interest rate plus the forward premium on the currency; thus the percent you will earn holding the foreign asset while protecting against exchange-rate change by selling the foreign currency forward.|
|CPI||Consumer price index.|
|Crawling peg||An exchange rate that is pegged, but for which the par value is changed frequently by small amounts and in a preannounced fashion in response to signals from the exchange market.|
|Creation||See trade creation.|
1. Recorded as positive (+) in the balance of payments, any transaction that gives rise to a payment into the country, such as an export, the sale of an asset (including official reserves), or borrowing from abroad. Opposite of debit.
2. A loan. For example, a trade credit.
|Credit crunch||A shortage of available loans. In well-functioning markets, this would simply mean a rise in interest rates, but in practice it often means that some borrowers cannot get loans at all, a situation of credit rationing.|
|Creditor nation||A country whose assets owned abroad are worth more than the assets within the country that are owned by foreigners. Contrasts with debtor nation.|
|Creeping inflation||This term seems to be used both for a rate of inflation that is low but nonetheless high enough to cause problems, and for a rate of inflation that itself gradually moves higher over time.|
|Crony capitalism||Used to describe a capitalist economy in which government or corporate officials and insiders provide lucrative opportunities for their friends and relatives. Term became popular during the Asian Crisis to describe some of the victim countries, but is now often used elsewhere as well.|
|Cross-border supply||The provision of an internationally traded service across national borders without requiring physical movement of buyer or seller, as when the service can be provided by long-distance communication. One of four such modes of supply of traded services.|
1. An elasticity that has been ignored by a student in a problem set.
2. The elasticity of supply or demand for one good or service with respect to the price of another.
|Cross-hauling||The simultaneous shipment of the same product in opposite directions over the same route. The export of the same good by two countries to each other would be cross-hauling, if it occurs at the same time.|
1. The exchange rate between two currencies as implied by their values with respect to a third currency.
2. Thus, since most currencies are commonly quoted in U.S. dollars, the exchange rate between any two currencies other than the dollar.
|Cross subsidy||The use of profits from one activity to cover losses from another. Thus the use of high prices for some of a firm's products, for example, to permit it to price below cost for others. In international trade, this could be one explanation for dumping.|
|CRS||Constant returns to scale = CRTS|
|CRTS||Constant returns to scale|
|CSE||Consumer support estimate|
|CSO||Civil society organization|
|Cultural argument for protection||The view that imports undermine a country's culture and identity -- for example by changing consumption patterns to ones more similar to those abroad, or by reducing demands for domestically produced art and music -- and therefore that imports should be restricted.|
|Cumulation||In an anti-dumping case against imports from more than one country, the summation of these imports for the purpose of determining injury. That is, the imports are deemed to have caused injury if all of them together could have done so, even if individually they would not.|
1. The money used by a country; e.g., the national currency of Japan is the yen.
2. The physical embodiment of money, in the forms of paper bills or notes, and metal coins.
|Currency area||A group of countries that share a common currency. Originally defined by Mundell (1961) as a group that have fixed exchange rates among their national currencies.|
|Currency basket||A group of two or more currencies that may be used as a unit of account, or to which another currency may be pegged.|
1. A group of countries that share a common currency; a currency area.
2. A group of countries that peg their different national currencies to a single currency.
|Currency board||An extreme form of pegged exchange rate in which management of both the exchange rate and the money supply are taken away from the central bank and given to an agency with instructions to back every unit of circulating domestic currency with a specified amount of foreign currency. Operates similarly to the gold standard.|
|Currency convertibility||See convertible currency.|
|Currency crisis||The crisis that occurs when particpants in an exchange market come to perceive that an attempt to maintain a pegged exchange rate is about to fail, causing speculation against the peg that hastens the failure and forces a devaluation.|
|Currency depreciation||See depreciation.|
|Currency factor||The portion of a rate of return that is due to the currency in which the asset is denominated. The currency factor can be nonzero either because of currency risk or because of expected appreciation or depreciation.|
|Currency in circulation||The amount of a country's currency that is in the hands of the public (households, firms, banks, etc), as opposed to sitting in the vaults of the central bank.|
|Currency intervention||Exchange market intervention.|
|Currency realignment||A change in the par value of a pegged exchange rate.|
|Currency reserves||This usually means international reserves.|
|Currency risk||Uncertainty about the future value of a currency.|
|Currency speculation||To buy or sell a currency in anticipation of its appreciation or depreciation respectively, the intent being to make a profit or avoid a loss. See speculation.|
|Currency swap||See swap.|
|Currency union||A group of countries that agree to peg their exchange rates and to coordinate their monetary policies so as to avoid the need for currency realignments.|
|Current account||A country's international transactions arising from current flows, as opposed to changes in stocks which are part of the capital account. Includes trade in goods and services (including payments of interest and dividends on capital) plus inflows and outflows of transfers.|
|Current account balance||Balance on current account|
|Current account deficit||Debits minus credits on current account. See deficit.|
|Current account surplus||Credits minus debits on current account. Same as balance on current account. See surplus.|
|Current prices||Refers to prices in the present, rather than in some base year; e.g., "GDP at current prices" means GDP as measured, in contrast to real GDP, or "GDP at XXXX prices," where the latter is measured in the prices of year XXXX.|
|CUSFTA||Canada-US Free Trade Agreement.|
|CUSTA||Same as Canada-US Free Trade Agreement.|
|Customs area||A geographic area that is responsible for levying its own customs duties at its border.|
|Customs classification||1. The category defining the tariff to be applied to an imported good. 2. The act of determining this category, which may be subject to various rules and/or to the discretion of the customs officer.|
|Customs Cooperation Council Nomenclature||An international system of classification of goods for specifying tariffs, called the Brussels Tariff Nomenclature prior to 1976, and later superseded by the Harmonized System of Tariff Nomenclature|
|Customs duty||An import tariff.|
|Customs officer||The government official who monitors goods moving across a national border and levies tariffs.|
|Customs procedure||The practices used by customs officers to clear goods into a country and levy tariffs. Includes clearance procedures such as documentation and inspection, methods of determining a good's classification, and methods of assigning its value as the base for an ad valorem tariff. Any of these can impede trade and constitute a NTB.|
|Customs Service||See U.S. Customs Service.|
|Customs station||An office through which imported goods must pass in order to be monitored and taxed by customs officers.|
|Customs union||A group of countries that adopt free trade (zero tariffs and no other restrictions on trade) on trade among themselves, and that also, on each product, agree to levy the same tariff on imports from outside the group. Equivalent to an FTA plus a common external tariff.|
|Customs valuation||The method by which a customs officer determines the value of an imported good for the purpose of levying an ad valorem tariff. When this method is biased against importing, it becomes an NTB.|
|Cyclical unemployment||The portion of unemployment that is due to the business cycle and thus rises in recessions but then disappears eventually after the recession ends.|