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| system of production in which each of a product's components is produced whare the cost of producing that component is lowest |
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| actory that imports materials and equipment on a duty-free and tariff-free basis for assembly or manufacturing and then re-exports the assembled product, usually back to the originating country. |
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| whether to purchase an existing or to build a subsidiary abroad form the ground up |
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| National accounting system that records all payments to entities in other countries and all receipts coming into the nation |
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| national account that records transactions involving the purchase or sale of assets |
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| national account that records tranactions involving the import and export of goods and services income receipts on assets abroad and income payments on foreign assets inside the country |
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| firms undertake foreign direct investment when the features of a particulare location combine with ownership and internatlization advantages to make a location appealing for investment |
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| international product life cycle theory |
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| a company will begin by exporting its product and later undertake foreign direct investment as the product moves through its life cycle |
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| imperfection in the market makes a transaction less efficient than it could be |
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| a firm tries to establish a dominant market presence in an industry by undertaking foreign direct investment |
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| Investment that does not involve obtaining a degree of control in a company |
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| extention of company activites into stages of production that provide a firm's inputs or absorbs its output |
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| countries remove all barriers to trade and teh movement of labor and capital between themselves but erect a common trade policy against nonmembers |
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| countires remove all barriers to trade between themselves but erect a common trade policy against nonmembers |
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| contries remove barriers to trade and the movement of labor and capital erect a common trade policy against nonmembers and coordinate their economic policies |
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| European Union plan that established its own central bank and currency |
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| Economic integration whereby countries seek to remove all barriers to trade between themselves, but each country determines its own barriers against nonmembers |
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| economic and political integration whereby countries coordinate aspects of their economic and political systems |
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| process whereby countries in a geographic region cooperate to reduce or eliminate barriers to the international flow of products people or capital |
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| increase in the level of trade between natins that results from regional economic integration |
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| diversion of trade away form nations not belonging to a trading bloc and toward member nations |
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| system that allocates financial resources in the form of debtand equity according to their most efficient uses |
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| currency that trades freely in the foreign exchange market with its price determinded by the forces of supply and demand |
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| practice of selling goods or services that are paid for in whole or in part with other goods or services |
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| Exchange rate calculated using two other exchange rates |
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| instantaneous purchase and sale of a currency in differnet markets for profit |
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| contract requiring the exchange of a specific amount of currency on a specific date at a scpcific exchange rate with all conditions fixed and not adjustable |
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| practice of insuring against potential losses that result form adverse changes in exchange rates |
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| right or option to exchange a specific amount of a currency on a specific date at a specific rate |
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| purchase or sale of a currency with the expectation that its value will change and generate a profit |
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| simultaneous purchase and sale of foreign exchange for two different dates |
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| bond issued outside the country in whose currency it is denominated |
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| market consisting of all the worlds currencies that are banked outside their contires of origin |
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| rate at which one currency is exchanged for another |
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| bond sold outside the borrowers countyr and denominated in the currency of the country in which it is sold |
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| contract that requires the exchange of an agreed upon amount of currency on a agreed upon date at a specific exchange rate |
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| market for currency transactions at forward rates |
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| exchange rate at which two parties agree to exchange currencies on a specified future date |
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| Interest rates that the worlds largest banks chage on another ofr loans |
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| rates are widely used as a reference rate for financial instruments |
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| profit-motivated purchase and sale of interest-paying secruities denominated in different currencies |
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| international bond market |
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| market consisting of all bonds sold by issuing companies governments or other organizaions outside their own countries |
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| international capital market |
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Definition
| network of individuals, companies, financial institutions and governmetns that invest and borrow across national boundaries |
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| international equity market |
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| market consisting of all stocks bought and sold outside the issures home country |
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Definition
| ease with which bondholders ahd shareholders may convert their investments into cash |
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| offshore financial center |
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Definition
| country ofr territory whose financial sector features very few regulations and few if any taxes |
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| Over the counter market decentralized exchange encompassing a global computer network of foreign exchange traders and other market participants |
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| the numerator ina quoted exchange rate or the currenccy with which another curency is to be purchased |
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| 1 local dollar will buy how many forgein dollars |
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| 1 forgien dollare will by how may local dollars |
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| unbundling and repackaging of hard to trade financial assets into more liquid negotiable and marketable financial instruments |
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| exchange rate requiring delivery of the traded currency within two business days |
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| market for currency transaction at spot rates |
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| extension of very small loans (microloans) to those in poverty designed to spur entrepreneurship. |
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| 1944 among nations to create a new international monetary system based on the value of the US dollar |
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| Intentionally lowering the value of a nation's currency |
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| intentionally revaluation |
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| raising the value of a nations curerncy |
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| view that prices of financial instruments reflect all publicly available information at any given time |
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Definition
| nominal interest rate is the sum of the real interest rate and expected rate of inflatin over a specific period |
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| International Fisher effect |
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| a difference in nminal interst rates supported by two contries currencies will cause an equal but opposite change in their spot exchange rates |
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| Fixed exchange-rate system |
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| exchange rate for convergting one currency into another is fixed by international agreement |
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| exchange rate system in which currencies float freely agalinst one another without governments intervening in currency markets |
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| techique that uses statistical models based on fundamental exonomic indicators to forecast exchange rates |
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| international monetary system in which nations linked the value of their paper currencies to specific values of bold |
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| international monetary system |
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Definition
| collection of agreements and institutins that govern exchange rates |
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Definition
| 1976 among IMG members to formalize the existing systme of floating exchange rates as the new international monetary system |
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| principle that an identical item must have an identical price in all countires when the pric is expressed in a common currency |
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| exchange rate ssytem in which currencies float against on another with governments intervening to stabliize their currencies at particular target exchange rates |
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| special drawing rights (SDR) |
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| asset whose value is based on a weighted basket of four currencies |
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| International Monetary Fund |
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| collection of agreements and institutions that govern exchange rates |
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| techique that uses charts of past trends in currency prices and other factors to forecast exchange rates |
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