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EADB East African Development Bank
EAI Enterprise for the Americas Initiative
EAMS Euro Area Member States
Early harvest A term, in trade negotiations, for agreeing to accept the results of a portion of the negotiations before the rest of the negotiations are completed.
Earnings The total amount earned, usually by a worker as wages, or by a firm as profits.
Earth Summit Rio Summit.
EAS East Asia Summit.
East African Development Bank "A leading Development finance institution with an overriding objective of promoting development in East Africa," EADB is a development bank for its five member countries: Burundi, Kenya, Rwanda, Tanzania, and Uganda.
East Asia Summit A meeting of the heads of state of a dozen or so countries to discuss both political and economic issues of common interest. The first of these meetings was held in 2005 in Kuala Lumpur. The sixth meeting is scheduled for mid-November 2011 in Indonesia and will include for the first time the United States and Russia.
Easy money A monetary policy that is expansionary, thus with low interest rates for borrowing. Contrasts with tight money.
Eaton-Kortum Model A useful variant of the Ricardian Trade Model in which a continuum of producers or industries have randomly chosen differences in productivities. Due to Eaton and Kortum (2002).
EBRD European Bank for Reconstruction and Development.
EBITDA Earnings before interest, taxes, depreciation, and amortization of a firm. Sometimes used as an optimistic indicator of potential profitability.
EC European Communities
ECA (United Nations) Economic Commission for Africa
ECB European Central Bank
ECE (United Nations) Economic Commission for Europe
ECF Extended Credit Facility
ECIPE European Centre for International Political Economy
ECLAC Economic Commission for Latin America and the Caribbean
Eco-dumping Environmental dumping
Eco-label A label that certifies that a product and its production meet high environmental standards. Such labeling is an alternative to the use of trade barriers to enforce such standards (see environmental protection argument). Examples are Green Seal in the US and Ecolabel in the EU.
Ecolabel See eco-label.
Econometric model A set of equations that have been estimated by econometric methods and that are then used, together, to forecast the economy or to calculate effects of changes in the economy. Thus, an economic model whose equations are econometrically estimated.
Econometrics The application of statistical methods to the empirical estimation of economic relationships. Econometric analysis is used extensively in international economics to estimate the causes and effects of international trade, exchange rates, and international capital movements.
Economic and Monetary Union The currency area formed in 1999 as a result of the Maastricht Treaty. Members of the EMU share the common currency, the euro.
Economic and Social Commission for Asia and the Pacific Regional development commission of the United Nations that deals with Asia and the Pacific. It works in three main areas: poverty reduction; managing globalization; and tackling emerging social issues.
Economic and Social Commission for Western Asia Regional development commission of the United Nations that deals with Western Asia. Its purpose, like the other regional commissions, is to promote cooperation and integration between the countries in the region.
Economic Commission for Latin America and the Caribbean One of five regional commissions of the United Nations, contributing to the economic and social development of Latin America and the Caribbean. Headquartered in Santiago, Chile. Established in 1948.
Economic contraction The downward phase of the business cycle, in which GDP is falling and unemployment is rising over time.
Economic cooperation This could mean many things, including any of the many ways that countries work together in the economic sphere to achieve mutual objectives. Most commonly, it means reducing barriers to trade and international investment and pursuing means to encourage economic growth.
Economic cost The monetary cost of an object or action, including reductions in wages, profits, and property values, but not including such nonmonetary costs as adverse consequences for health or safety, or negative effects on others.
Economic crisis Although there are many economic events that might be called crises, this term usually refers to a sudden drop in aggregate demand that, if prolonged, leads to recession.
Economic decision A decision about an economic issue, most commonly about how to allocate resources among multiple purposes.
Economic development Sustained increase in the economic standard of living of a country's population, normally accomplished by increasing its stocks of physical and human capital and improving its technology.
Economic efficiency The extent to which a given set of resources is being allocated across uses or activities in a manner that maximizes whatever value they are intended to produce, such as output, market value, or utility. Contrasts with engineering efficiency, which focuses within a single activity on the output it produces per unit input.
Economic expansion The upward phase of the business cycle, in which GDP is rising and unemployment may be falling over time.
Economic exposure Same as exchange rate exposure.
Economic factor Any of the considerations that are relevant to a decision and that involve economic variables, such as prices and wages.
Economic freedom Freedom to engage in economic transactions, without government interference but with government support of the institutions necessary for that freedom, including rule of law, sound money, and open markets.
Economic geography See New Economic Geography.
Economic growth The increase over time in the capacity of an economy to produce goods and services and (ideally) to improve the well-being of its citizens.
Economic indicator A variable that is measured and publicly reported and that is considered meaningful not only for itself but as a sign of how rapidly the larger economy is expanding or contracting.
Economic integration See integration.
Economic interdependence The extent to which economic performance (GDP, inflation, unemployment, etc.) in one country depends positively or negatively on performance in other countries.
Economic justice 1. Fairness and equity in economic affairs, presumably by having laws, governments, and institutions that treat people equally and avoid favoring particular individuals or groups.
2. As most often used, the term carries a connotation that economic justice can only be achieved by lessening the power and changing the practices of international financial institutions, transnational corporations, and rich-country governments.
Economic model A collection of assumptions, often expressed as equations relating variables, from which inferences can be derived about economic behavior and performance.
Economic nationalism A preference for supporting a country's own firms, industries, and workers -- and, in the case of firms and other assets, keeping them owned within the country -- even at the expense of the economic gains that could be had from trade and international investment.
Economic partnership agreement An agreement negotiated between the European Union and a developing country -- especially members of the ACPCountries -- for form free trade areas and otherwise assist them in their development.
Economic profit Revenue from an activity minus the opportunity cost of the resources used in that activity.
Economic rate of return The net benefits to all members of society, as a percentage of cost, taking into account externalities and other market imperfections.
Economic relations Economic activity that involves participants of two countries, most obviously trade but other forms as well. Some pairs of countries that have essentially no political relations nonetheless have economic relations.
Economic rent See rent.
Economic sanction The use of an economic policy as a sanction.
Economic slump Recession or a slowing of the rate of economic growth that comes close to being a recession.
Economic Strategy Institute Describes itself as a "private, non-profit, non-partisan public policy research organization dedicated to assuring that globalization works with market forces to achieve maximum benefits rather than distorting markets, and imposing costs." It seems to be mainly an outlet for the views of one man, Clyde Prestowitz.
Economic structure The major features of a country or region's economy, including what and how much it produces and trades, and how it spends its income.
Economic summit A meeting, usually of government leaders, to discuss economic conditions and policies. In the international context, these are most prominently the meetings of heads of state of the G-20 or, previously, the G-7 or G-8.
Economic union A common market with the added feature that additional policies -- monetary, fiscal, welfare -- are also harmonized across the member countries.
Economic variable Any economic magnitude the size of which may change and is subject to explanation by an economic model. Examples are endless, including consumption, the price of a good, the exchange rate, the tax receipts of a government, the number of children per family, etc.
Economic vulnerability The extent of a country's exposure to lost sales and especially lost supplies of needed products due to changes in foreign markets and foreign policies. Vulnerability rises with increased openness, but depends (negatively) also on diversification and on the political relations a country has with its trading partners.
Economic welfare See welfare.
Economies of agglomeration Agglomeration economies
Economies of scale Increasing returns to scale.
Economies of scope The property that a firm's average cost falls as it produces a larger number of different products.
Economist, The A weekly newsmagazine (which calls itself a newspaper), published in the United Kingdom but distributed worldwide. Since it was established in 1843, it has been a champion of free trade.
ECSC European Coal and Steel Community
ECU European Currency Unit
Edgeworth-Bowley Box A geometric device showing allocations of 2 goods to 2 consumers in a rectangle with dimensions equal to the quantities of the goods. Preferences enter as indifference curves relative to opposite corners of the box, tangencies defining efficient allocations and the contract curve. First drawn by Pareto (1906), based originally, though only partially, on a diagram of Edgeworth (1881). This and the Edgeworth production box are often called just the Edgeworth Box, even though Edgeworth never drew either.
Edgeworth Box See Edgeworth-Bowley Box and Edgeworth production box.
Edgeworth Production Box A variation of the consumption Edgeworth Box that instead represents the allocations of 2 factors to 2 industries for use in production functions. Efficient allocations now appear as tangencies between isoquants, while the contract curve becomes the efficiency locus.
EEA European Economic Area
EEC European Economic Community
Effect of trade This term normally refers, often only implicitly, to the effect of a change in some policy or other exogenous variable that will increase the quantity of trade. Since in trade models, trade itself is endogenous, the effects associated with a change in trade depend on what caused it.
Effective exchange rate An index of a currency's value relative to a group (or basket) of other currencies, where the currencies in the basket are given weights based on the amount of trade between the countries that use the currencies. Also called a trade-weighted exchange rate.
Effective protection The concept that the protection provided to an industry depends on the tariffs and other trade barriers on both its inputs and its outputs, since a tariff on inputs raises cost. Measured by the effective rate of protection.
Effective protective rate Same as effective rate of protection.
Effective rate of protection A measure of the protection provided to an industry by the entire structure of tariffs, taking into account the effects of tariffs on inputs as well as on outputs. Letting bij be the share of input i in the value of output j, and ti be the tariff on good i, the ERP of industry j is ERPj = (tj−Σibijti)/(1−Σibij). Due to Corden (1966).
Effective tariff Effective rate of protection.
Efficiency See economic efficiency.
Efficiency locus The set of efficient allocations in an Edgeworth production box. It is usually a curve, similar to a contract curve, and in fact is sometimes called that.
Efficiency loss In economics, efficiency loss usually refers to the reduction in economic welfare due to a market imperfection or distortion. The deadweight loss due to a tariff is a good example of an efficiency loss.
Efficiency unit A unit of a factor, usually of labor, with the same productivity as some benchmark. Thus, if country A has LA units of labor that is only 1/4 as productive as labor in country B, then using B's labor as benchmark, A has only LA/4 efficiency units of labor. The assumption of equal productivity can then be used.
Efficient allocation An allocation that it is impossible unambiguously to improve upon, in the sense of producing more of one good without producing less of another.
Efficient breach The violation of a rule or law when the benefit to the violator of doing so exceeds the harm that it does to others. It is argued that a system of rules, such as the GATT and WTO, should allow for efficient breach by, perhaps, allowing violation of its rules in return for compensation of those who are harmed.
Efficient capital market An asset market in which, at a minimum, current price changes are independent of past price changes, or, more strongly, price reflects all (publicly) available information. Some believe foreign exchange markets to be efficient, which in turn implies that future exchange rates cannot profitably be predicted.
Efficient market Efficient capital market
Efficient quantity In a market with undistorted supply and demand, the quantity at which the supply price equals the demand price. That is efficient, because supply price is the marginal cost and demand price the marginal benefit of an additional unit.
EFSF European Financial Stability Facility
EFTA European Free Trade Association
EIB European Investment Bank
Elastic Having an elasticity greater than one. For a price elasticity of demand, this means that expenditure rises as price falls. For an income elasticity it means that expenditure share rises with income, a superior good. Contrasts with inelastic and unit elastic. Elastic demand for either exports or imports is sufficient to satisfy the Marshall-Lerner condition.
Elastic offer curve An offer curve along which import demand is always elastic. It is therefore not backward bending. Contrasts with inelastic offer curve.
Elasticities approach 1. The method of analyzing the determination of the balance of trade, especially due to a devaluation, that focuses on the price elasticities of exports and imports. According to this approach, the effect depends critically on the Marshall-Lerner Condition.
2. The explanation of exchange rates using supply and demand curves.
Elasticity A measure of responsiveness of one economic variable to another -- usually the responsiveness of quantity to price along a supply or demand curve -- comparing percentage changes (%Δ) or changes in logarithms (d ln). The arc elasticity of x with respect to y is ε = %Δx/%Δy. The point elasticity is ε = d lnx/d lny = (y/x)(dx/dy).
Elasticity of demand for exports This is normally the price elasticity of demand for exports of a country, either for a single industry or for the aggregate of all imports. Equals the rest of world's elasticity of demand for imports, which therefore also enters the Marshall-Lerner condition.
Elasticity of demand for imports This is normally the price elasticity of demand for imports of a country, either for a single industry or for the aggregate of all imports. The latter plays a critical role in determining how the country's balance of trade responds to the exchange rate. See Marshall-Lerner condition.
Elasticity of substitution The elasticity of the ratio of two inputs to a production (or utility) function with respect to the ratio of their marginal products (or utilities). With competitive demands, this is also the elasticity with respect to their price ratio. For example, with factors L,K and factor prices w,r, the elasticity of substitution of a production function F(K,L) is σ = (wL/rK)d(K/L)/d(w/r).
Elasticity of transformation The elasticity of an economy's output of one good with respect to its output of another (holding other outputs, if there are any, constant).
Elasticity pessimism The view that elasticities of demand for imports are sufficiently small that the Marshall-Lerner Condition will be violated. See Machlup (1950).
EMA European Monetary Agreement
Embargo The prohibition of some category of trade. May apply to exports and/or imports, of particular products or of all trade, vis a vis the world or a particular country or countries.
Emerging economy 1. Originally this term was applied to countries that had recently ceased to be part of the Soviet Union and its satellites, and thus emerging from centrally planned communist economies. The term drew attention to their transition to becoming market economies.
2. Rather quickly, perhaps acknowledging the importance of central planning and the failure of markets in many other countries, the term has expanded to encompass also developing countries, not necessarily ever communist, as they expanded the role of markets.
Emerging market 1. Term coined in the early 1980s by World Bank economist Antoine van Agtmael to describe "economies with low-to-middle per capita income" (according to Financial Times Oct 20, 2006).
2. Same as emerging economy.
3. The securities market of an emerging economy.
EMI European Monetary Institute
Emigration The migration of people out of a country.
Empirical finding Something that is observed from real-world observation or data, in contrast to something that is deduced from theory.
Employment People working for pay or in a family-owned enterprise or farm. Much more specific definitions are used for measuring employment by national statistical agencies such as the US Bureau of Labor Statistics. Contrasts with unemployment.
Employment argument for protection The use of a tariff or other trade restriction to promote employment, either in the economy at large or in a particular industry. This is a second best argument, since other policies -- such as a fiscal stimulus or a production subsidy -- could achieve the same effect at lower economic cost.
EMS European Monetary System
EMU Economic and Monetary Union
Enabling Clause The decision of the GATT in 1979 to give developing countries special and differential treatment, thus permitting the Generalized System of Preferences, which would otherwise be a violation of the GATT's most favored nation principle.
Endangered Species Convention Convention on International Trade in Endangered Species of Wild Fauna and Flora
Endogenous 1. Something that depends on other things, which should be taken into account in an analysis.
2. Endogenous variable
Endogenous growth Economic growth whose long-run rate depends on behavior and/or policy.
Endogenous protection Protection that is explained as the outcome of economic and/or political forces. See political economy of protection.
Endogenous variable An economic variable that is determined within a model. It is therefore not subject to direct manipulation by the modeler, since that would override the model. In trade models, the quantity of trade itself is almost always endogenous. Contrasts with exogenous variable.
Endowment The amount of something that a person or country simply has, rather than their having somehow to acquire it. In the H-O Model of trade theory, endowments refer to primary factors of production, ignoring the fact that some of them -- especially capital and skill -- are deliberately accumulated.
Enemy See natural enemy.
Engine of growth Term sometimes used to describe the role that exports may have played in economic development, both of some of the regions of recent settlement in the nineteenth century and of the more recent NICs. Due to Robertson (1938).
Engineering efficiency See economic efficiency.
Enterprise A firm.
Enterprise for the Americas Initiative Begun in June 1990 under US President H. W. Bush, this intended to create a FTA covering most of the Western Hemisphere, and promote FDI and debt relief. The trade objective was succeeded by the planned FTAA. The EAI now is a program for providing assistance to Latin America within USAID.
Enterprise zone 1. A location that is granted special treatment (such as lower or zero taxes) by government in order to encourage economic activity.
2. An export processing zone.
Entrepôt trade The import and then export of a good without further processing, usually passing through an entrepôt which is a storage facility from which goods are distributed. See reexports.
Entrepreneur A person who starts a business.
Entrepreneurship The talent, knowledge, and willingness to engage in new activities, especially those that may result in new kinds of firms.
Entry barrier A natural or artificial impediment to a firm beginning to operate in an industry. Entry barriers give a first mover advantage to firms already in an industry, and these are often national firms in competition with potential foreign entrants.
Entry writer An employee of a customs brokerage whose job is to prepare customs declarations, including finding the correct tariff treatment of an imported good by identifying its proper classification.
Envelope The outermost points traced out by a moving curve.
Environmental dumping Export of a good from a country with weak or poorly enforced environmental regulations, reflecting the idea that the exporter's cost of production is below the true cost to society, providing an unfair advantage in international trade. Also called eco-dumping.
Environmental Kuznets Curve An inverse U-shaped relationship hypothesized between per capita income and environmental degradation. Named after the Kuznets Curve dealing with inequality. Idea due to Grossman and Krueger (1993).
Environmental protection argument for a trade intervention The view that trade should be restricted in order to help the environment. Examples include embargos on imports made from endangered species, limits on imports produced by methods harmful to the atmosphere, and restrictions on investment into locations with lax environmental standards. This is usually a second-best argument.
Environmental subsidy A subsidy intended for environmental purposes. A subsidy for adapting existing facilities to new environmental laws or regulations is non-actionable under WTO rules.
Environmental trade policy The use of trade policies for environmental purposes.
Eonia Euro OverNight Index Average. The interest rate that banks in the euro zone charge each other on 1-day loans. Thus the 1-day euribor rate.
EPA Economic partnership agreement.
EPU European Payments Union.
EPZ Export processing zone.
Equalization See factor price equalization.
Equation of Exchange M×V = P×Q, where M is the quantity of money in an economy, V is the velocity of money, P is the price level, and Q is the real output of the economy. The equation is true by definition because it implicitly defines velocity of money. It is central to the quantity theory of money.
Equilibrium 1. A state of balance between offsetting forces for change, so that no change occurs.
2. In competitive markets, equality of quantity supplied and quantity demanded.
Equilibrium exchange rate This is ambiguous, since there is no single agreed upon model of the exchange rate:
1. The exchange rate at which supply and demand for a currency are equal.
2. The exchange rate at which there is balance of payments equilibrium.
3. The exchange rate at which purchasing power parity holds, in some form.
4. The exchange rate at which the expected change in the exchange rate, in the near future, is zero.
5. The exchange rate at which the country's international reserves are neither rising nor falling.
Equilibrium level The value taken on by an economic variable in equilibrium, as opposed either to some other value, or to its rate of change.
Equilibrium position Same as equilibrium level, though perhaps of several variables at once, perhaps as displayed in a graph.
Equilibrium terms of trade The terms of trade at which the country's excess supply of each good to the world market equals the world market's excess demand. If the country is a small open economy, whose excess supplies and demands are therefore negligible, then this is simply calculated from given world prices.
Equity Share in the ownership of a corporation; more commonly called a stock, as in the stock market.
Equivalent quota The quota that sets the same level of imports that is entering a country under a tariff, or perhaps under some other NTB.
Equivalent tariff Tariff equivalent.
Equivalent variation The amount of money that, paid to a person, group, or whole economy, would make them as well off as a specified change in the economy. Provides a monetary measure of the welfare effect of that change that is similar to, but not in general the same as, compensating variation.
ERM Exchange Rate Mechanism
ERP Effective rate of protection
ERR Economic rate of return
Escalation 1. Regarding the structure of tariffs, see tariff escalation.
2. In the context of a trade war, escalation refers to the increase in tariffs that occurs as countries retaliate again and again.
ESCAP Economic and Social Commission for Asia and the Pacific.
ESCWA Economic and Social Commission for Western Asia.
Escape clause 1. The portion of a legal text that permits departure from its provisions in the event of specified adverse circumstances.
2. The U.S. statute (section 201, 1974 trade act) that permits imports to be restricted, for a limited time and on a nondiscriminatory basis, if they have caused injury to U.S. firms or workers. The escape clause accords with the Safeguards Clause (Article XIX) of the GATT.
Ethical trade As used by the Ethical Trading Initiative, this term refers primarily to trade that conforms with high levels of labor standards, including the avoidance of child labor, forced labor, sweatshops, adverse health and safety conditions, and violations of labor rights.
Ethical Trading Initiative An alliance of multinational companies, nongovernmental organizations, and labor unions seeking to promote and identify ethical trade.
ETI Ethical Trading Initiative
ETSG European Trade Study Group
EU European Union
EU15 The 15 members of the European Union from 1995 through 2003, prior to its 2004 enlargement.
EU enlargement The process of taking more member countries into the EU.
Euler's Theorem 1. The property of a function X=F(V), if it is homogeneous of degree N, that ΣiViF/Vi=NX.
2. The useful implication of this that, for a production function X=F(V) with constant returns to scale, the competitive payments to factors sum to the value of output: ΣiwiVi=pX.
Euratom The European Atomic Energy Community, created in 1956 along with the EEC.
Euribor Stands for the Euro Interbank Offered Rate, a euro-denominated interest rate charged by large banks among themselves on euro-denominated loans. Analogous to LIBOR for the euro.
Euro The common currency of a subset of the countries of the EU, adopted January 1, 1999, with paper notes and coins put into circulation January 1, 2002.
Euro Area Member States Counties that have adopted the euro; the euro zone.
Euro-Mediterranean Partnership An declaration at a 1995 conference in Barcelona between the 15 members of the European Union and its 12 Mediterranean partners to enter a new phase in their relationship, promoting peace and stability, free trade, and cultural understanding. Also called the Barcelona Process.
Euro Zone The countries of the EMU. That is, the group of European countries, members of the EU, that adopted the common currency, the euro. See baffling pigs.
Eurobond A bond that is issued outside of the jurisdiction of any single country, denominated in a eurocurrency.
Eurocurrency See Eurodollar.
Eurodad A European network of NGOs working to reduce poverty and empower the poor in developing countries through improved economic and financial policies.
Eurodollar Originally referred to U.S. dollar-denominated deposits in commercial banks located in Europe. Over time, the term came to include deposits in a commercial bank in any country denominated in any currency other than that of the country. Now sometimes called eurocurrencies.
Europe 1992 An initiative, begun with the Single European Act in 1987 by the European Union, to fully integrate the markets of the member countries by the end of 1992. The process involved extensive harmonization of laws and regulations that would otherwise interfere with the cross-border movement of goods and services.
Europe Agreement An agreement between the EU and each of ten Eastern European countries (starting with Hungary and Poland in 1994) creating free trade areas and establishing additional forms of political and economic cooperation in preparation for these countries' eventual membership in the EU.
European Bank for Reconstruction and Development An international financial institution that supports primarily private-sector projects in countries from Central Europe to Central Asia.
European Centre for International Political Economy A research think tank founded in 2006 and focused on "trade policy and other international economic policy issues of importance to Europe."
European Central Bank The central bank of the Euro Zone -- the group of countries using the euro as their currency.
European Coal and Steel Community An economic agreement in 1951 among six countries of Western Europe -- Belgium, France, Germany, Italy, Luxembourg, and Netherlands -- that preceded formation of the EEC and ultimately the EU.
European Commission The highest decision-making body of the European Union. The Commission, which consists of one Commissioner from each member country, proposes legislation and "ensures that EU law is correctly applied by member countries."
European Communities The name adopted in 1967 by the European Economic Community when it merged with the ECSC and Euratom. This name and the acronym EC was used until 1992 when it was replaced by European Union.
European Currency Unit A composite currency that is a basket of most of the currencies of countries in the European Union. Conceived in 1979, it has been used as a unit of account of the European Monetary System.
European Economic Area The group of countries comprised of the EU together with EFTA. The two groups have agreed to deepen their economic integration.
European Economic Community A customs union formed in 1958 by the Treaty of Rome among six countries of Europe: Belgium, France, Germany, Italy, Luxembourg, and Netherlands; predecessor to the EC in 1967 and the EU in 1992.
European Financial Stability Facility A pool of funds created by the Euro Area Member States in 2010 to be used to rescue member countries in crisis by lending to them.
European Free Trade Association A free trade area made up of countries in Europe that did not join the European Economic Community. EFTA was established in 1960 among Austria, Denmark, Norway, Portugal, Sweden, Switzerland, and the United Kingdom. As of 2012 it included Iceland, Liechtenstein, Norway, and Switzerland.
European Investment Bank The "long-term lending bank of the European Union." It supports projects within the member states as well as in countries that are working to become members states of the EU.
European Monetary Agreement An intergovernmental organization administered by the OECD that facilitated settlement of balance of payments accounts among its member states from 1958 to 1972. It replaced the EPU, and its functions were taken over by the IMF in 1972.
European Monetary Institute A temporary institution that existed from January 1994 to June 1998 during the years leading up to the European Central Bank and the introduction of the euro. It's purpose was to facilitate cooperation and coordination among the central banks of the EU and to pave the way for the shift to the euro.
European Monetary System A currency union formed by some of the members of the EEC in 1979 that continued, with changing membership, until replaced by the EMU and the euro in 1999.
European Payments Union An international arrangement for settling payments among member countries in Europe during a period in which many of the countries' currencies were not convertible. The EPU functioned from 1950 to 1958, after which it was replaced by the EMA.
European Recovery Program See Marshall Plan.
European single market See single market.
European Trade Study Group A group that meets annually for conferences on the economics of international trade.
European Union A group of European countries that have chosen to integrate many of their economic activities, including forming a customs union and harmonizing many of their rules and regulations. Preceded by EEC and EC. As of August, 2012, the EU had 27 member countries.
Eurostat The statistical office of the European Union, which provides statistics on economic and other variables at the level of the EU member countries.
Eurozone 1. The Euro Zone.
2. Pertaining to the Euro Zone or the euro.
Eurozone bonds Bonds denominated in euros.
Even case In international trade models with multiple goods and factors, this is the special case of an equal number of goods and factors. It is convenient for analysis, because the matrix of factor input requirements is square and therefore potentially invertible.
Everything But Arms The name given by the EU to its decision in 2001 to eliminate quotas and tariffs on all products except arms from the world's 48 poorest countries.
Ex ante Before the fact; that is, before some event has taken place.
Ex ante analysis Analysis of the effects of a policy, such as trade liberalization or formation of a PTA, based only on information available before the policy is undertaken. Also prospective analysis.
Ex factory Applied to a price, this means the price at the factory, and does not include any other charges, such as delivery or subsequent taxes.
Ex post After the fact; that is, after some event has taken place.
Ex post analysis Analysis of the effects of a policy, such as trade liberalization or formation of a PTA, based on information available after the policy has been implemented and its performance observed. Also retrospective analysis.
Ex works Ex factory.
Ex post tariff Implicit tariff.
Exception In a trade agreement, there may be exceptions for sensitive products.
Excess demand Demand minus supply. Thus a country's demand for imports of a homogeneous good is its excess demand for that good.
Excess profit Profit of a firm over and above what provides its owners with a normal (market equilibrium) return to capital.
Excess supply Supply minus demand. Thus a country's supply of exports of a homogeneous good is its excess supply of that good.
Exchange 1. To engage in trade, either within a country or internationally.
2. Foreign exchange.
Exchange appreciation See appreciation.
Exchange control Rationing of foreign exchange, typically used when the exchange rate is fixed and the central bank is unable or unwilling to enforce the rate by exchange-market intervention.
Exchange depreciation See depreciation.
Exchange economy See pure exchange economy.
Exchange equalization fund The unit within a government or central bank that manages a pegged exchange rate. It manages reserves of foreign currencies, which it uses to buy and sell domestic currency as needed to keep the exchange rate within specified bounds.
Exchange market 1. The market on which national currencies are exchanged for one another.
2. The actual exchange market, which exists primarily among large international banks. Others who wish to exchange currencies do it through these banks.
3. The theoretical representation of the exchange market as either the interaction of supply and demand arising from exchange-market transactions or as an asset market equilibrium between currencies.
Exchange market intervention Usually done by a country's central bank, this is the purchase and sale of the country's currency on the exchange market in order to influence or fully determine its price. These transactions, unless they are sterilized, change the monetary base of the country and thus its money supply.
Exchange rate The price at which one country's currency trades for another, typically on the exchange market.
Exchange rate determination The process by which a country's exchange rate comes to be what it is. With a floating exchange rate, this may be modeled in various ways, including the elasticities approach, the monetary approach, the portfolio approach, and the asset approach.
Exchange rate exposure The extent to which the stock-market value of a firm varies with changes in exchange rates. Also called economic exposure.
Exchange Rate Mechanism A system that was operated by some central banks within the European Union, which intervened in exchange markets to limit the fluctuations of their currencies relative to one another, while letting all of them collectively float.
Exchange rate overshooting The response of an exchange rate to a shock by first moving beyond where it will ultimately settle. Thought to help explain exchange rate volatility, this was first modeled by Dornbusch (1976).
Exchange rate pass-through See pass-through.
Exchange rate protection The manipulation of the exchange rate so as to increase the domestic prices of, and demand for, domestically produced goods. Since an undervalued currency stimulates demand for all domestically produced tradable goods, this form of protection, unlike tariff protection, can only be provided to the tradable sector as a whole, not to individual industries.
Exchange rate regime The rules under which a country's exchange rate is determined, especially the way the monetary or other government authorities do or do not intervene in the exchange market. Regimes include floating exchange rate, pegged exchange rate, managed float, crawling peg, currency board, and exchange controls.
Exchange rate risk Exchange risk
Exchange rate stability Lack of movement over time in the exchange rate of a country.
Exchange rate system Exchange rate regime
Exchange rate target See target.
Exchange rationing See exchange control or ration foreign exchange.
Exchange regime See exchange rate regime.
Exchange risk Uncertainty about the value of an asset, liability, or commitment due to uncertainty about the future value of an exchange rate. Unless they cover themselves in the forward market, traders with commitments to pay or receive foreign currency in the future bear exchange risk. So do holders of assets and liabilities denominated in foreign currency.
Exchange stabilization fund A government institution sometimes used to handle exchange market intervention, charged with the explicit function of smoothing exchange rate fluctuations.
Excise subsidy A subsidy paid on production or sale (consumption) of a particular good.
Excise tax A tax on production or sale (consumption) of a particular good.
Exercise To execute the terms of a contract. See option.
Exhaustion 1. In intellectual property regimes, the transaction at which rights terminate. Under national exhaustion, rights end with first sale in a country, preventing parallel imports. Under international exhaustion, rights end with first sale anywhere, permitting parallel imports.
2. Product exhaustion
Exim Bank Export-Import Bank of the United States
Exogenous Coming from outside, usually in the context of an economic model, in which it means only that it is not explained within the model.
Exogenous growth Economic growth that occurs without being the result of deliberate policy or behavior. The term arises because neoclassical growth models converge to a steady state in which per capita income is constant over time. Growth, then, requires exogenous technical progress.
Exogenous variable A variable that is taken as given by an economic model. It therefore is subject to direct manipulation by the modeler. In most models, policy variables such as tariffs and par values of pegged exchange rates are exogenous. Contrasts with endogenous variable.
Exon Florio Act A law enacted in the United States in 1988 empowering the president to stop a foreign acquisition of a US company (or a merger) if it threatens national security.
Exorbitant privilege Term of Valery Giscard d'Estaing in the 1960s for the US position in the international monetary system, the Bretton Woods System of currencies pegged to the US dollar. The US benefited then, and still does, as the issuer of the currency most countries hold as international reserves.
Expansion Economic expansion
Expansionary Tending to cause aggregate output (GDP) and/or the price level to rise. Term is typically applied to monetary policy (an increase in the money supply or a decrease in interest rates) and to fiscal policy (an increase in government spending or a tax cut), but may also apply to other macroeconomic shocks. Contrasts contractionary.
Expectation The expectation of a variable is the same as its expected value, and is also used with both meanings.
Expected value 1. The mathematical expected value of a random variable. Equals the sum (or integral) of the values that are possible for it, each multiplied by its probability.
2. What people think a variable is going to be. In general, the expectation in this second sense may be more important than the first for determining behavior on a market, such as the exchange market.
Expenditure function A function representing the minimum expenditure needed, at a given price vector P, to achieve a given utility U from a vector of goods consumed X: E(P,U) = minX{PX | U(X)≥U}. Useful for conveniently representing quantities demanded by its partial derivatives.
Expenditure share The fraction of expenditure (usually consumer expenditure) that is spent on a particular good or purpose. With Cobb-Douglas preferences, expenditure shares are constant, independent of prices and income.
Experience good A product whose value can be better known after having consumed it. Producers of experience goods may temporarily charge a price lower than marginal cost to induce buyers to try the product. Done with an export, this would be legally considered dumping.
Exploit To take advantage of someone or something for one's own benefit. Economists often use the term with a neutral or positive connotation, advocating that one should fully exploit one's resources for example. Others see the term as quite negative, viewing exploitation as being done at the expense of others, which in some cases (e.g., monopsony) it is.
Export 1. A good that moves outward across a country's border for commercial purposes.
2. A product, which might be a service, that is provided to foreigners by a domestic producer.
3. To cause a good or service to be an export under definitions 1 and/or 2.
Export bias Any bias in favor of exporting. Most often applied to growth that is based disproportionately on accumulation of the factor used intensively in the export industry and/or technological progress favoring that industry.
Export cartel A cartel of exporting countries or firms.
Export control Regulation or restriction of the export of certain goods, sometimes in order to limit access to the sensitive technologies they embody, sometimes to alleviate domestic shortages.
Export credit A loan to the buyer of an export, extended by the exporting firm when shipping the good prior to payment, or by a facility of the exporting country's government. In the latter case, by setting a low interest rate on such loans, a country can indirectly subsidize exports.
Export Credits Arrangement Arrangement on Export Credits
Export credit insurance A program to guarantee payment to exporting firms who extend export credits.
Export duty Export tax
Export Enhancement Program A program of the US Department of Agriculture to provide export subsidies for particular products, intended to "meet the competition from subsidizing countries," especially the European Union.
Export elasticity This could be any of several elasticities, including that of demand for, or supply of, a country's exports, either total or for particular products, with respect to particular prices or income.
Export elasticity of substitution This is the elasticity of substitution in demand for a country's exports of a product relative to the exports of another country of that product, both to a particular importing country, with respect to the relative price of the two exporting countries' exports.
Export facilitation Anything intended to make it easier to export, but usually refers to government services or programs with this objective.
Export factoring The sale by an exporter of an accounts receivable (the foreign importer's commitment to pay), at a discount, to another entity -- the export factor -- for immediate payment. Similar to forfaiting.
Export guaranty The promise by an exporter's government to a private lender that it will repay the loan if the buyer of the export does not.
Export-Import Bank of the United States The official export credit agency of the United States government, the Exim Bank assists the financing of US exports, both goods and services. It says it does not compete with private-sector financing, but "fills gaps," assuming credit and country risks that the private sector does not accept.
Export-import company A firm whose business consists mainly of international trade: buying goods in one country and selling them in another, thus both exporting and importing. Same as import-export company.
Export incentive A government program that makes it more attractive for a firm, industry, or country to export. Most simply, an export subsidy.
Export instability Frequent and large fluctuations, over time, in the quantity and/or value of a country's exports, either individually or in aggregate.
Export insurance Insurance available to those who export to cover risks such as damage to the product in transit, nonpayment, and political risks.
Export intensity The fraction of the output of a firm, or sometimes an industry within a country, that is exported.
Export-led growth Growth of an economy over time that is thought to be caused by expansion of the country's exports. See export promotion, engine of growth.
Export licensing See licensing.
Export limitation Any policy that restricts exports.
Export management company A firm that handles the process of exporting for other firms. It may do this for a commission or fee, or it may purchase the goods for subsequent sale.
Export multiplier The multiplier for a change in exports; that is, the increase in GDP caused by a one-unit increase in exports.
Export parity price The price that a producer gets or can expect to get for its product if exported, equal to the f.o.b. price minus the costs of getting the product from the farm or factory to the border. This and the import parity price together define a range of the possible equilibrium prices for an equivalent domestically produced good.
Export penetration The ability of domestic producers to penetrate foreign markets, as measured by the ratio of exports to output of a domestic firm or industry.
Export performance requirement Export requirement.
Export pessimism The view that efforts to expand exports by developing countries will lead to a decline in their terms of trade because of an inability (due to weak demand) or unwillingness (expressed via protection) of developed countries to absorb these exports.
Export platform The use of a country or region as a place to produce for export to another country. Used especially when a preferential trade arrangement provides easier access to the destination country.
Export platform FDI Foreign direct investment from a source country into a host country for the purpose of exporting to a third country.
Export price index Price index of the goods that a country exports.
Export processing zone A designated area in a country in which production for export is encouraged, usually by special tax treatment and by permitting firms to import duty-free so long as the imports are used as inputs to production of export. Thus a free trade zone with additional inducements for export.
Export promotion A strategy for economic development that stresses expanding exports, often through policies to assist them such as export subsidies. The rationale is to exploit a country's comparative advantage, especially in the common circumstance where an over-valued currency would otherwise create bias against exports. Contrasts with import substitution.
Export quantity index Quantity index of the goods that a country exports.
Export quota A quantitative restriction on exports, often the means of implementing a VER.
Export quota agreement An agreement among a group of exporters of a product to limit output and divide the market, each promising not to exceed its quota. Used by a cartel to stabilize and raise price and thus the incomes of the participants.
Export requirement A requirement by the government of the host country of FDI that the investor export a certain amount or percentage of its output.
Export restraint Voluntary export restraint
Export similarity index See Finger-Kreinin index .
Export subsidy 1. A subsidy to exports; that is, a payment to exporters of a good per unit of the good exported.
2. Sometimes applied to any payments to producers that lead to an increase in exports.
Export substitution 1. Export promotion; thus the substitution of production for export in place of production for the domestic market. Contrasts with import substitution.
2. Export of more processed forms of a good instead of only exporting the raw material.
Export tariff A tax on exports, more commonly called an export tax.
Export tax A tax on exports.
Export trading company Export management company
Exported protection The protective effect that rules of origin have on the partner country's input producers when applied to a country's imports within a free trade area. Term was first in 1993 working paper version of Krueger (2001).
Exports The quantity or value of all that is exported out of a country.
Exposure See exchange rate exposure.
Expropriate To transfer ownership of private property, against the will of its owner, to government. The possibility of expropriation is one of the risks of foreign direct investment.
Extended Credit Facility A program of the International Monetary Fund to provide financial assistance to low income countries with protracted balance of payments problems. It replaced the PRGF in 2009 in response to the global financial crisis.
Extensive margin Refers to varying the amount of trade (or other activity) of a firm, industry, or country by varying the number of products that it trades, as opposed to the intensive margin at which it would vary the quantity of trade of a given number of products.
External balance 1. Balance of payments equilibrium.
2. Any target value for the balance on current account, balance on capital account, or balance of payments. Contrasts with internal balance.
External benefit A positive (i.e., beneficial) externality.
External cost A negative (i.e., harmful) externality.
External debt The amount that a country owes to foreigners, including the debts of both the country's government and its private sector.
External deficit Trade deficit or current account deficit.
External diseconomy Negative externality.
External economies of scale A form of increasing returns to scale in which productivity and thus costs of individual firms depend on the output of their entire industry, rather than just their own. Unlike more conventional (internal) scale economies, these are consistent with perfect competition.
External economy Positive externality.
External equilibrium External balance, in contrast to internal equilibrium or internal balance.
External increasing returns to scale External economies of scale.
External position The balance of trade or the balance on current account.
External returns to scale External economies of scale.
External saving Capital inflow
External shock A shock that originates from outside of an economic system, especially a country.
Externalities argument for protection The (second best) argument that an industry should be protected because it generates positive externalities for other industries or consumers.
Externality An effect of one economic agent's actions on another, such that one agent's decisions make another better or worse off by changing their utility or cost. Beneficial effects are positive externalities; harmful ones are negative externalities.