Glossary of IPE terms
AAnthropogenic climate change: Changes in the climate system resulting directly or indirectly from human activity rather than natural variability.
Anti-money-laundering regime: An international regime to govern money laundering, with the aim of regulating the laundering of funds gained from illicit activities, such as corruption and drug trafficking, as well as flows of money used to finance illicit activities, such as terrorism.
Arbitrage: The practice of seeking profits through exploiting price differences between two or more markets.
BBalance of payments: The balance of a country’s international transactions in a specific period, which comprises the balance of current account transactions and capital account transactions.
Balance sheet: A summary of an organization’s or an individual’s assets, equity, and liabilities at a specific point in time.
Bilateral investment treaty: An agreement between two states that governs the terms and conditions for private investment by residents and companies of each contracting state.
Bretton Woods institutions: Established following negotiations at Bretton Woods, New Hampshire, in 1944, the IMF and the World Bank are commonly known as the Bretton Woods institutions.
Bretton Woods System: A term commonly used to refer to the post-World War II international monetary system, which incorporated the general acceptance of national controls on capital flows in order to support a fixed but adjustable exchange rate system, while maintaining the commitment to an open international trade system.
CCapital account convertibility: Allows residents unrestricted access to foreign exchange to pay for financial assets abroad, and allows nonresidents to repatriate their capital overseas.
Capital controls: Restrictions on access to foreign exchange for capital account transactions, which may target either capital inflows or outflows, or both.
Carry trade: The sale of low-yielding currencies to finance the purchase of higher-yielding currencies.
Cartel: A formal organization of producers that agree to cooperate to fix prices and production levels, which may be formed by private firms or states that exercise control over particular industries. Cartels are more influential in an industry characterized by an oligopoly, where a small number of sellers dominate the market.
Conditionality: Policy actions and economic targets that are negotiated between lenders and borrowers, and which borrowers must achieve in order to receive loan instalments.
Cognitive authority: The authority of those who, as a result of their expertise, position and experience, are recognized by a particular audience to have authoritative knowledge on specific issues.
Collateralized debt obligations: Structured asset-backed securities that are issued in tranches with a range of risk classifications.
Collective action problems: Situations where a group of actors, such as states, all stand to gain from a certain action, but the associated cost makes it unlikely that any one actor can or will undertake it.
Comparative advantage: The ability of a country to produce a particular good or service relatively more efficiently than others. Product specialization in different economic sectors or products leads to welfare gains between trading partners.
Compromise of embedded liberalism: A term coined by John Gerard Ruggie to describe the political compromise at the heart of the Bretton Woods system, which combined a liberal, multilateral trade and monetary system with domestic autonomy for policy experimentation and intervention.
Conflict of interest: When an actor is faced with multiple interests, one of which might corrupt the motivation for acting in accordance with another.
Credit default swap: A financial agreement that insures the buyer of a credit default swap against the risk of a loan default or other credit risk.
Current account convertibility: Allows residents access to foreign exchange to pay for trade in goods and services, overseas travel, and for interest and dividend payments.
DDebt default: Debt is defined as outstanding financial liabilities arising from past borrowing, which may be owed to external or domestic creditors and is typically in the form of loans or bonds. Debt default occurs when a party is unwilling or unable to pay their debt obligations.
Debt flows: Changes in the level of debt owed to external creditors over an interval of time.
Debt relief: An agreement between creditors and debtors to lessen a country’s debt burden by rescheduling interest and principal payments, or by partially or fully cancelling debt service payments falling due during a specific period of time.
Debt service to exports: The ratio of the sum of repayments on the principal and interest on total long-term debt to the value of exports of goods and services and receipts of income from abroad.
Debt service: Scheduled interest and principal repayments due on public and publicly guaranteed debt outstanding during a year.
Debt stocks: External debt stocks are the accumulated amount of outstanding debt owed by a country to external creditors at a specific point in time.
Double taxation avoidance agreements: Bilateral or multilateral treaties between countries that aim to mitigate the effects of double taxation through defining which types of taxes can be levied in different tax jurisdictions, which organizations or individuals are exempt from the agreement, and how the agreement will be enforced.
Economic development: A series of coordinated actions to improve standards of living and welfare of a specific area.
Economic globalization: The international integration of markets for trade in goods, services and capital.
Economies of scale: The economic benefits firms gain through increasing the scale of production when greater quantity reduces the average production cost per unit.
Environmental Kuznets curve: A hypothesis that economic growth will increase pollution levels until per-capita income reaches a certain threshold of development, after which environmental quality will improve.
Epistemology: The study of what the nature of knowledge is, how it is acquired, and to what extent a given subject or phenomena can be known.
Euromarkets: Offshore currency markets that enable currency transactions free from domestic interest rate regulations and other capital controls, such as US dollar-denominated transactions outside the territorial borders of the USA.
Exchange rate regime: The institutional architecture for managing how a currency is exchanged for foreign currencies. Contemporary regimes are usually classified as fixed (pegged), intermediate, or floating.
Exchange rate: The rate at which one currency can be exchanged for another.
Foreign direct investment: Direct investment in production in a country, whereby overseas companies invest in existing firms or establish new subsidiaries.
Forum shopping: The practice whereby an actor or actors will seek to shift deliberation or decision-making in a specific issue area from one forum to another that is likely to be more favourable to their interests.
Free trade: Free trade is defined as the absence of government restrictions on either the price or supply of imported and exported goods.
Free trade area: An international agreement to remove barriers to cross-border trade between two or more countries.
Global production network: The interconnected processes through which a specific product or service is produced, distributed and consumed.
Gross domestic product: the total value of goods and services produced in an economy within a specific time period.
Import-substitution industrialization: A development strategy aimed at reducing foreign imports through policies that favour the growth of local industries and manufactured products as substitute goods in order to increase national self-sufficiency and build economies of scale.
Informal fund transfer systems: A means for the international transfer of funds without recourse to the formal financial system.
Information asymmetry: A situation where an imbalance of power exists between two parties when one has access to more or better-quality information.
Interdependence: A relationship that is characterized by mutual dependence, regardless of whether the actors within the relationship include states, firms, social groups or organizations.
International monetary power: The ability of one state to manipulate international monetary relations in order to influence the preferences or actions of other states.
International monetary system: A set of common rules, principles and norms for making international payments across territorial borders.
Key currency: The preferred monetary unit used internationally for the purposes of global exchange, accounting and savings.
Legitimacy: Legitimacy is an intersubjective quality that is conferred on one actor’s decisions and behaviour by others when it is recognized as conforming to socially-sanctioned norms, rules and principles.
Lender of last resort: A financial institution that is able to extend financial assistance in the form of loans when other official or private creditors will not.
Liquidity: The ease with which assets can be converted into money, which determines the ability of an institution to meet its payment obligations.
Methodology: How one goes about the business of knowing – the procedures and principles for investigating a particular subject or issue.
Multilateralism: A form of policy coordination among three or more states on the basis of agreed principles of appropriate conduct in specific issue-areas.
Multilateral trade system: A system of international trade rules that both limit and permit particular forms of government intervention in market processes to determine resource allocation.
Money laundering: The process of concealing the source of illicit wealth and income.
Moral hazard: A situation where risk-taking is encouraged because the costs of risky behaviour are borne by others.
Negative externalities: External costs that are not incorporated within the price of a particular good.
Non-governmental organizations: Organizations that operate independently from governments, which are not profit-seeking and do not engage in criminal or violent activities.
Non-tariff barriers to trade: Non-tariff barriers restrict imports without resort to trade tariffs, and may include import quotas and licences, product and safety standards, rules of origin, import bans, intellectual property laws, and ‘buy national’ policies.
Norms: Socially-accepted standards of appropriate behaviour among a given community of actors.
Official creditors: Governments or other bilateral public agencies (such as export credit agencies) and multilateral institutions such as the World Bank, regional development banks, and the IMF.
Official development assistance: The voluntary transfer of economic resources from one country to another, with the objective – at least in part – of enhancing the welfare of the recipient country (commonly referred to as foreign aid).
Ontology: The study of the nature of being, centred on questions about what there is to know about particular objects of study.
Poverty: Poverty is pronounced deprivation in well-being, extreme poverty is a condition characterized by lack of access to basic human needs.
Principal–agent problem: The difficulties of motivating one party – the agent – to act in accordance with the wishes of another – the principal.
Private non-guaranteed debt: Debt owed by private sector borrowers to external creditors on loans that do not benefit from a public sector guarantee from the debtor country.
Progressive taxation: A progressive tax system is one in which the share of income paid in taxes rises with income.
Public external debt: An external obligation of a public debtor, such as a national or local government or agency, or an autonomous public body.
Publicly-guaranteed external debt: External obligations on a private debtor, the repayment of which is guaranteed by a public entity such as a national government or agency.
Public goods: Goods which individuals cannot be effectively excluded from using, and where use of a good by one individual does not reduce its availability to others.
Qualitative methods: Research methods which aim to gain an in-depth understanding of action and behaviour, and the reasons that produce particular actions and behaviour.
Quantitative easing: An increase in the money supply which is created by a central bank purchasing bonds and other debt instruments.
Quantitative methods: Research methods which aim to systematically investigate social, economic, and political phenomena through measurement.
Recapitalization: Reorganizing a corporation’s capital structure through exchanging debt for equity, or vice versa.
Rentier state: A state which depends on revenue from selling or leasing resource assets rather than domestic revenue extraction.
Reserve currency: A currency held in large quantities by governments and monetary institutions as part of their foreign exchange reserves.
Resource curse: When a rich endowment of natural resources impedes rather than benefits a country’s economic growth and development by increasing dependence on volatile global commodity prices, thereby reducing the incentives for economic diversification.
Resource nationalism: Domestic or state control of resource companies to ensure the maximum strategic benefit accrues to the home state.
Securitization: The process of transforming a non-tradable asset – such as the income-stream from mortgage interest payments – into a tradable asset that can be sold on to other investors.
Short-term and long-term debt: Short-term debt is debt that is due to mature within one year. Long-term debt has an original or extended maturity date of more than one year.
Special drawing rights: An international reserve asset created and maintained by the IMF, which functions as the IMF’s unit of account.
State agency: The agential power of a state to purposively exercise influence in a specific realm of action.
State capacity: The organizational, material, and social resources a state has access to, and how well it is able to order and deploy those resources in terms of both efficiency and effectiveness.
State capitalism: A system in which the state plays a decisive role in the economy through public control or ownership of wealth, investment, and key enterprises.
Systemic risk: The risk of the collapse of an entire financial system, rather than the collapse of an institution or group of institutions.
Tariffs: A percentage tax levied on imports.
Tax avoidance: The use of artificial schemes to take advantage of legal loopholes or the deliberate structuring of assets to reduce tax liabilities.
Tax evasion: Explicitly criminal tax behaviour, including concealing income or filing misleading tax returns.
Tax havens: Jurisdictions with low or non-existent personal and corporate income taxes for non-residents, which are characterized by financial secrecy.
Technical assistance: A form of external assistance provided by states or international organizations which focuses on building technical capacity through transferring knowledge and information to recipient government agencies.
Tobin tax: An idea suggested by economist James Tobin in 1972. The Tobin tax was conceived as a small percentage tax on foreign exchange transactions between different currencies, which was intended to reduce volatility in exchange rates caused by currency speculation as opposed to exchange rate transactions to pay for trade.
Trade protectionism: An economic policy of regulating or restraining cross-border trade to protect domestic firms and workers from foreign competition.
Tragedy of the commons: A situation in which common resources are over-exploited because individual actors lack the motivation to use them sustainably.
Underdevelopment: when the resources of a country or area are not used to achieve their economic and social potential.
Washington consensus: A term coined by John Williamson in 1989 to refer to the broad area of agreement between the US Treasury, the IMF, and the World Bank over policy prescriptions for developing countries which emerged during the late 1980s.
Welfare state: The cluster of institutional processes through which governments redistribute income either through insurance schemes that mitigate risk or through spending on basic social services.