Global Economic Analysis

Nominal GDP

Output valued at current prices; changes can reflect both prices and quantities.

Real GDP

Output adjusted for price changes; used to compare production over time.

GDP growth, year-on-year

Real output compared with the same period a year earlier.

GDP at purchasing power parity (PPP)

Compares output after adjusting for differences in domestic price levels.

GDP at market exchange rates

Converts output using market currency exchange rates; relevant to external purchasing power.

Inflation

The rate at which the general price level increases.

Disinflation

Inflation slows, but the overall price level may still rise.

Deflation

A fall in the general price level, not merely slower inflation.

Labor productivity

Real output per worker or per hour worked.

Productive capacity

Ability to produce usable goods and services with skills, capital and infrastructure.

Economies of scale

Average cost can fall when fixed costs are spread across more units.

Fixed cost vs variable cost

Fixed cost does not vary with short-run output; variable cost changes with output.

Unit labor cost

Labor compensation per accepted unit; wages divided by labor productivity.

Economic mechanism

A causal channel explaining how a change affects an outcome.

Binding constraint

An obstacle whose relaxation would most improve the target outcome at the margin.

Evidence vs inference

Evidence is observed or sourced; inference interprets what it may imply.

Causal identification

Establishing the effect of an intervention rather than mere correlation.

Spillover

A change affecting another actor or economy through a specific economic link.

Distributional effect

Who gains, who loses, and who bears a policy’s costs.

Global value chain

Production stages distributed across firms and countries.

Trade-off

A benefit sacrificed or cost accepted when choosing an option.

Reconsideration trigger

Specific evidence or change that would cause you to revise a decision.

Budget deficit

Government spending exceeds revenue over a specified period.

Public debt

Stock of accumulated government liabilities at a point in time.

Primary balance

Government revenue minus non-interest spending.

Debt-to-GDP ratio

Government debt divided by GDP; scale measure, not proof of sustainability.

Debt refinancing

Replacing maturing obligations with new borrowing, potentially at new rates.

Interest-rate transmission to debt service

Higher rates affect new and refinanced fixed-rate debt over time.

Fiscal space

Capacity to use fiscal policy without undermining sustainable financing.

Dollar financing advantage

US federal debt is mainly in its own currency, limiting direct FX mismatch.

Limits of the dollar advantage

Interest costs, inflation and real resources still constrain spending.

AI investment vs productivity

Building data centers raises investment; productivity needs more output per input.

Growth contribution vs GDP share

Contribution is share of GDP change; GDP share is part of the total level.

Final consumption

Household plus government final consumption expenditure.

Gross capital formation

Investment in assets and changes in inventories in the GDP expenditure accounts.

Net exports

Exports minus imports; one component of GDP expenditure.

China: precautionary saving

Households may save more when worried about future income, health or housing.

China: property downturn transmission

Less construction can cut supplier orders, employment, household wealth and spending.

China: growth rebalancing

Shifting the relative roles of consumption, investment and external demand.

China: export growth limitation

Exports can rise while household demand and property investment remain weak.

Ownership advantage (OLI)

Firm-specific asset such as patented design, software or expertise.

Location advantage (OLI)

Why a production activity is better placed in one country than another.

Internalization advantage (OLI)

Why a firm owns/controls activity rather than outsourcing or licensing it.

Foreign direct investment (FDI)

Cross-border investment establishing a lasting interest or influence in an enterprise.

Cost per accepted unit

Total relevant production cost divided by units meeting quality standards.

Supplier concentration risk

Dependence on few qualified suppliers raises disruption vulnerability.

Luma case: US option

Owned assembly: $5m initial; $105/unit; 8 months readiness; 2 weeks US delivery.

Luma case: China option

Contracted assembly: $1m initial; $92/unit; 3 months readiness; 6 weeks US delivery.

Luma case: shared chip dependency

Both arrangements buy critical chips from one third-economy supplier.

Luma case: key uncertainty

Forecast demand, border costs and disruptions prevent a firm profit ranking.

European Union vs euro area

EU: treaty institutions and members; euro area: common currency and policy.

Single Market: four freedoms

Movement of goods, services, people and capital under shared rules.

Customs union

Internal tariff removal plus a common external tariff.

Single Market compliance mechanism

Common requirements may reduce duplicated fixed costs across markets.

Legal access vs actual benefit

Firms may still lack finance, skills, partners or demand.

ECB monetary policy

One euro-area monetary stance, primarily aiming at price stability.

National fiscal policy in euro area

National governments retain major tax and spending decisions under shared rules.

Asymmetric shock effects

One disturbance produces different impacts due to differing economic exposure.

Monetary transmission differences

Same ECB stance can yield different loan rates due to borrower and bank conditions.

Currency union trade-off

Less currency risk within union, but no independent national monetary or FX policy.

Optimum currency area — Mundell

Sharing currency works better when other adjustment channels handle unequal shocks.

Adjustment channels within euro

Labor mobility, relative wages/prices and fiscal measures can absorb shocks.

Stabilization vs structural adjustment

Stabilization protects now; structural change builds future capability or matching.

Risk sharing

Spreading shock costs across actors or regions; costs do not disappear.

SURE

EU loans supported national job-retention measures in 2020–22.

Rodrik’s integration trilemma

Deep integration, full national autonomy and democracy cannot all be maximized.

Meridia output and unemployment

Fictional: output index 100→92; unemployment 9%→14%.

Nordland output and unemployment

Fictional: output index 100→97; unemployment 5%→7%.

Meridia case: national support

Fictional option A: targeted support in 2 weeks; national budget bears cost.

Meridia case: joint financing

Fictional option B: favorable loans in 8 weeks; checks and repayment remain.

Meridia case: retraining

Fictional option C: skills and matching in 6 months; little immediate protection.

EU institutions: Commission

Usually proposes EU laws and oversees their application.

EU institutions: Parliament and Council

Normally co-legislate; Council represents national ministers.

2020 Germany vs Spain GDP

Slide evidence: real GDP −4.9% Germany, −10.8% Spain; causation not established.

European fiscal reference values

3% deficit/GDP and 60% debt/GDP; not automatic insolvency tests.

Evidence-to-decision structure

Compare evidence → mechanism → lead choice → alternative → trade-off → trigger.

Digital dividends: complementary conditions

Skills, competition and accountable institutions shape technology’s broader benefits.

Translation and export mechanism

Clearer foreign-language listings lower buyer information barriers.

eBay translation study: estimates

Expert acceptance 82%→90%; estimated affected-platform exports +10.9%.

External validity

An effect in one context may not replicate where key constraints differ.