| Offer curve Diagram |  |
| OAS | Organization of American States |
| OBM | Obsolescing Bargain Model |
| Obsolescing Bargain Model | A model of interaction between a multinational enterprise and a host country government, which initially reach a bargain that favors the MNE but where, over time as the MNE's fixed assets in the country increase, the bargaining power shifts to the government. Due to Vernon (1971). |
| OEA | Organización de Estados Americanos (Spanish for Organization of American States) |
| OECD | Organisation for Economic Co-operation and Development |
| OEEC | Organisation for European Economic Co-operation |
| Offer curve | A curve showing, for a two-good model, the quantity of one good that a country will export (or "offer") for each quantity of the other that it imports. Also called the reciprocal demand curve, it is convenient for representing both exports and imports in the same curve and can be used for analyzing tariffs and other changes. |
| A diagram that combines the offer curves of two countries (or one country and the rest of world) to determine equilibrium relative prices. |
| Official rate | The par value of a pegged exchange rates. |
| Official reserve transactions | Transactions by a central bank that cause changes in its official reserves. These are usually purchases or sales of its own currency in the exchange market in exchange for foreign currencies or other foreign-currency-denominated assets. In the balance of payments a purchase of its own currency is a credit (+) and a sale is a debit (-). |
| Official reserves | The reserves of foreign-currency-denominated assets (and also gold and SDRs) that a central bank holds, sometimes as backing for its own currency, but usually only for the purpose of possible future exchange market intervention. |
| Offset requirement | As a condition for importing into a country, a requirement that foreign exporters purchase domestic products and/or invest in the importing country. |
| Offshoring | Movement to a location in another country of some part of a firm's activity, usually a part of its production process or, frequently, various back office functions. |
| Ohlin definition | The price definition of factor abundance. In contrast to the quantity definition, the price definition incorporates differences in demands as well as supplies. Due to Ohlin (1933). |
| OIM | French acronym of International Organization for Migration |
| OIT | Organización Internacional del Trabajo (Spanish for International Labor Organization) |
| OLI Paradigm | A framework for analyzing the decision to engage in FDI, based on three kinds of advantage that FDI may provide in comparison to exports: Ownership, Location, and Internalization. Due to Dunning (1979). |
| Oligopoly | A market structure in which there are a small number of sellers, at least some of whose individual decisions about price or quantity matter to the others. |
| Oligopsony | A market structure in which there are a small number of buyers. |
| OMA | Orderly Marketing Arrangement |
| OMC | Organización Mundial de Comercio (Spanish for World Trade Organization) |
| OMO | Open market operation. |
| One cone equilibrium | A free-trade equilibrium in the Heckscher-Ohlin Model in which prices are such that all goods can be produced within a single country, and there is only one diversification cone. This will arise if countries' factor endowments are sufficiently similar compared to factor intensities of industries. Contrasts with multi-cone equilibrium. |
| One-dollar-one-vote yardstick | A characterization of the Kaldor-Hicks welfare criterion normally used in evaluating trade policies and more generally in cost-benefit analysis, based on a sum of monetary values including consumer and producer surplus. |
| One-way arbitrage | The use, by a potential supplier or demander in a market, of a different market or markets to accomplish the same purpose, taking advantage of a discrepancy among their prices. With transaction costs, this enforces smaller price discrepancies than would be permitted by conventional arbitrage. Due to Deardorff (1979). |
| One-way option | Refers to the situation of a speculator on an exchange market with a pegged exchange rate. If there is doubt about the viability of the peg, the speculator can sell the currency short knowing that there is only one direction (one way) that the currency is likely to move. Therefore there is little risk associated with such speculation. |
| ONU | Organización de Naciones Unidas (Spanish for United Nations) |
| OPEC | Organization of Petroleum Exporting Countries |
| Open currency position | An open position. |
| Open economy | An economy that permits transactions with the outside world, at least including trade of some goods. Contrasts with closed economy. |
| Open-economy multiplier | The simple Keynesian multiplier for a small open economy. Equals 1/(s+m), where s is the marginal propensity to save and m is the marginal propensity to import. |
| Open market operation | The sale or purchase of government bonds by a central bank, in exchange for domestic currency or central-bank deposits. This changes the monetary base and therefore the domestic money supply, contracting it with a bond sale and expanding it with a bond purchase. |
| Open markets | Markets that are free of restrictions on who can buy and sell. |
| Open position | An obligation to take or make delivery of an asset or currency in the future without cover, that is, without a matching obligation in the other direction that protects from effects of change in the price of the asset or currency. Aside from simple ownership and debt, an open position can be acquired or avoided using the forward market. |
| Open regionalism | Regional economic integration that is not discriminatory against outside countries; typically, a group of countries that agrees to reduce trade barriers on an MFN basis. Adopted as a fundamental principle, but not defined, by APEC in 1989. Bergsten (1997) offers five definitions, ranging from open membership to global liberalization and trade facilitation. |
| Openness | The extent to which an economy is open to trade, and sometimes also to inflows and outflows of international investment. |
| Openness coefficient | The coefficient on any variable measuring openness in a regression, often a regression explaining economic growth. Thus an estimate of the importance of openness for growth. |
| Openness index |
1. Any measure of openness.
2. The ratio of a country's trade (exports plus imports) to its GDP. |
| Opportunity cost | The cost of something in terms of opportunity foregone. The opportunity cost to a country of producing a unit more of a good, such as for export or to replace an import, is the quantity of some other good that could have been produced instead. |
| Optimal | Best, by whatever criterion decisions are being made; thus yielding the highest level of utility, profit, economic welfare, or whatever objective is being pursued. |
| Optimal currency area | The optimal grouping of regions or countries within which exchange rates should be held fixed. First defined (as "optimum currency areas") by Mundell (1961). |
| Optimal output |
1. For a firm this usually means the output of the good that it produces that, when sold, maximizes profit.
2. For a country, this usually means the combination of different goods (and services) that it can produce that is worth the most at world prices, perhaps adjusted for any externalities. |
| Optimal tariff | The level of a tariff that maximizes a country's welfare. In a nondistorted small open economy, the optimal tariff is zero. In a large country it is positive, due to its effect on the terms of trade. |
| Optimal tariff argument | An argument in favor of levying a tariff in order to improve the terms of trade. The argument is valid only in a large country, and then only if other countries do not retaliate by raising tariffs themselves. Even then, this is a beggar thy neighbor policy, since it lowers welfare abroad. See Johnson (1954). |
| Optimum |
1. The best. Usually refers to a most preferred choice by consumers subject to a budget constraint, a profit maximizing choice by firms or industry subject to a technological constraint, or in general equilibrium, a complete allocation of factors and goods that in some sense maximizes welfare.
2. As an adjective, same as optimal. |
| Optimum optimorum | The best of the best, or the global optimum. This term is used, when there are several allocations each of which is locally optimal, to refer to the best among these. |
| Option | A contract that permits one party to buy from (or sell to) the other party something at a prespecified price during a prespecified period of time, leaving the choice of whether to do this or not (whether to "exercise" the option) up to the first party, which buys the option. Options exist for many assets, including foreign exchange. |
| Orderly Marketing Arrangement | An agreement among a group of exporting and importing countries to restrict the quantities traded of a good or group of goods. Since the impetus normally comes from the importers protecting their domestic industry, an OMA is effectively a multi-country VER. |
| Organisation for Economic Co-operation and Development | An international organization of developed countries that "provides governments a setting in which to discuss, develop and perfect economic and social policy." As of June 2007, it had 30 member countries. |
| Organisation for European Economic Co-operation | An international organization established in 1948 as the recipient institution of aid through the Marshall Plan. In 1961 it was replaced by the OECD. |
| Organization of American States | An international organization of the countries of the Western Hemisphere, fostering cooperation among them and advancing their common interests. It has 35 member states, although the government of one of them, Cuba, is excluded from participating. |
| Organization of Petroleum Exporting Countries | A group of countries that includes many, but not all, of the largest exporters of oil. Its major purpose is to regulate the supply of petroleum and thereby to stabilize (often raise) its price. The international oil cartel. As of June 2007, it had 12 member countries. |
| Origin principle | The principle in international taxation that value added taxes be kept only by the country where production takes place. Under the origin principle, value added taxes are not collected on imports and not rebated on exports. Contrasts with the destination principle. |
| Origin rule | See rules of origin. |
| Output augmenting | Said of a technological change or technological difference if one production function produces a scalar multiple of the other. Also called Hicks neutral. |
| Output gap | The amount by which a country's output, or GDP, falls short of what it could be given its available resources. A positive output gap is considered to exist when a country's unemployment rate is greater than the NAIRU. |
| Outsourcing |
1. Performance outside a firm or plant of a production activity that was previously done inside.
2. Manufacture of inputs to a production process, or a part of a process, in another location, especially in another country. 3. Another term for fragmentation. |
| Outward oriented strategy | Export promotion. |
| Over-invoicing | The provision of an invoice that reports the price as higher than is actually being paid. |
| Over-valued currency | The situation of a currency whose value on the exchange market is higher than is believed to be sustainable. This may be due to a pegged or managed rate that is above the market-clearing rate, or, under a floating rate, it may be due to speculative capital inflows. Contrasts with under-valued currency. |
| Overdraft facility | In the IMF, an arrangement permitting countries to draw more foreign currency from it than they have deposited. The right to do so is a Special Drawing Right and, when used, is transferred to the country whose currency is withdrawn. |
| Overhang | See debt overhang and money overhang. |
| Overshooting | See exchange rate overshooting. |