BUS 200 GMU Final

administrative barriers

ways govts slow down trade: forms, weird customs, bureaucratic stuff to dissuade ppl from importing/exporting to a specific country

Gold par value

what one unit of currency was defined as to grains of gold

what tariffs do

Raise govt revenue Provide protection to domestic producers Consumers pay more Tariffs Reduce efficiency of world market

mercantilism

16th/17th centuries highest govt involvement

comparative advantage

1800s the ability of an individual or group to carry out a particular economic activity more efficiently than another activity.

Hecksler-Ohiln

1900s a country will export goods that use its abundant factors intensively, and import goods that use its scarce factors intensively.

democracy

citizens should be involved in decision making, have constitutional representation

When did the global financial order emerge?

late 1800s to early 1900s

Rule of law

law is supreme over government and individuals

authoritarian

leaders dont have to answer to public.

Floating exchange rate

determined by supply and demand, less predictable than fixed or pegged

Countries can be succesful with or without democracy

look at US and China

Porters diamond

looks at the sources of competitive advantage. Can be used to analyze a firm's ability to function in a national market, and analyze a national market's ability to compete in an international market.

Schumpeter: Creative Destruction

new innovations wipe out old ones. capitalism has pain and gain.

changing roles of developed/developing world

shifted from developed to developing. most imports and exports in developing countries

Dumping

selling goods below cost of production or market value

import quotas

trade restriction limits quantity of goods that can be imported into a country in a given period of time.

Technology Transfer

deliberately spreading a technology

Technology diffusion channels

FDI Collaboration Licensing Reverse engineering the internet in house R&D does not spread tech and innovation

Which works better?

Fixed/Pegged can expand and contract money supply easier than floating o Forces govt to have monetary discipline, behave more responsibly o Reduces speculation o Less uncertainty b/c you have a better idea of what's going to happen to the value of the currency o Only 20% of IMF members float

Why are some countries more innovative than others?

Historical reasons: post war Japan/Germany. Cutural differences: uncertainty avoidance=/=innovation Workforce skills Govt policies: does govt encourage innovation?, protection of intellectual property, support universities, tax incentives Financial resources: capital, strong banking system, stock market, private investors

Jamaica Agreement

Replaced Bretton Woods. allowed every country to float their currency if they wanted to

TRIPS

Trade Related Intellectual Property rights came from WTO attempts to bring standardization to international intellectual property laws

Bretton Woods

USD tied to gold, everyone else tied to USD. collapsed b/c US detatched from gold standard. US detatched from gold standard b/c US spending was increasing faster than our supply of gold

Innovation

improvements that offer commercial benefits

Foreign Debt crisis

a point where a country's foreign debt exceeded their earning power and they are not able to repay it. Ex: Greece could no longer pay its foreign debts

Currency crisis

a situation in which serious doubt exists as to whether a country's central bank has sufficient foreign exchange reserves to maintain the country's fixed exchange rate. The crisis is often accompanied by a speculative attack in the foreign exchange market. Ex: Thailand: speculative attacks on their currency caused currency to collapse, spread to rest of SE Asia

nation state

authoritative institutional framework for governing a defined territory. Sovereignty has to be recognized by other nation states. Monopoly over coercive power.

Common law

based on case law and precedent

civil law

between individuals, includes companies. based on codified law, opposite of common law. Ex: contract law, employment law

Ricardo

compares the opportunity costs of producing goods across countries. Related to comparative advantage which holds that under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage. Trade is a positive sum game

Primary goods

consists of raw or natural materials

what does patent activity tell us?

countries with more patent filings have more innovation,

IMF

created during Bretton Woods. Goal: maintain order in global financial system, makes loans to countries experiencing crisis

World Bank

created during Bretton Woods. Goal: to promote general economic development, makes low interest loans to poor countries to help with infrastructure

New trade theory

first mover advantage: first country gains advantage b/c its able to get to economies of scale faster. Increasing economies of scale lead to greater variety of products and lower costs

R&D

functional area within a company/country that undertakes innovative activities

When a product goes off patent what kind of company manufactures it?

generic

Technology Diffusion

how technology spreads

technology

intersection of learning and doing, facilitates learning into doing

2008 Financial crisis

o Mortgage backed securities: work great when real estate markets are increasing o Decline of US housing market: due in part to mortgage backed securities o Globalized banks: started doing risky investments (derivatives), lots of global banks were invested in US derivatives o Regulatory failure: regulations didn't work the way they should have o Global credit tightening

positive sum game

occurs when no one wins at someone else's expense

Banking crisis

often associated with a panic or a run on the banks, in which investors sell off assets or withdraw money from savings accounts with the expectation that the value of those assets will drop if they remain at a financial institution. Ex: Iceland: iceland banks invested in risky derivatives, caused run on banks, govt refused bailout, devalued currency to bring country back

Gold Standard

practice of pegging currencies to gold

why do govts intervene in trade?

protect jobs national security retaliation protecting consumers to further foreign policy objectives to protect human rights

tertiary goods

support production and distribution process ex: insurance, transport, advertising, warehousing

tariffs

taxes levied on imports that raise the cost of imports relative to domestic products

absolute advantage

the ability of an individual or group to carry out a particular economic activity more efficiently than another individual or group.

secondary goods

the manufacturing and assembly process. It involves converting raw materials into components,

protectionism

the theory or practice of shielding a country's domestic industries from foreign competition by taxing imports.

intermediate goods

utilized to produce a final good or finished product.

Fixed/Pegged exchange rate

value of currency is fixed/pegged to another country's, common in developing countries, usually pegged to USD

balance of trade equilibrium

value of imports always = value of exports when on the gold standard