International Economics Chapter 12: The Global Macroeconomy

Vocabulary flashcards covering the introductory concepts, exchange systems, global financial integration, and institutional roles in international macroeconomics based on Chapter 12 of Feenstra/Taylor.

International macroeconomics

The study of large-scale economic problems in interdependent economies, focusing on economy-wide variables such as exchange rates, prices, interest rates, income, wealth, and the current account.

Exchange rate

The price of a foreign currency.

Fixed (pegged) exchange rate

A regime where the value of a currency is set at a constant rate relative to another currency.

Floating (flexible) exchange rate

A regime where the value of a currency fluctuates against others based on market behavior.

Exchange rate crisis

A sudden and pronounced loss of currency value against another currency; specifically defined as losing more than $30\%$ of value in U.S. dollar terms over one year after having changed by less than $20\%$ each of the previous two years.

Iceland economic crisis (2008)

A severe crisis following an exchange rate collapse where real output per person shrank by more than $10\%$ and unemployment rose from $1\%$ to $9\%$, with output not recovering to 2008 levels until 2015.

External wealth

A country’s net worth from an international perspective, calculated as the difference between its foreign assets (what it is owed by the rest of the world) and its foreign liabilities (what it owes to the rest of the world).

Creditor nation

A country with positive external wealth (assets exceed liabilities).

Debtor nation

A country with negative external wealth (liabilities exceed assets).

Institutions

The overall legal, political, cultural, and social structures that influence economic and political actions.

Advanced countries

Countries with high levels of income per person that are well integrated into the global economy.

Emerging markets

Middle-income countries that are growing and becoming more integrated into the global economy.

Developing countries

Low-income countries that are not yet well integrated into the global economy.

Capital controls

Restrictions or regulations placed on international financial transactions.

Common currency

A monetary arrangement where a group of countries adopts a single currency with shared policy responsibility, such as the Eurozone.

Dollarization

A process where a country chooses to use a currency over which it has no policy control, such as U.S. dollar use in El Salvador and Ecuador.

Regimes

The rules and norms in which economic policy choices are made.

Current Account Deficit

Occurs when a country's Gross National Expenditure exceeds its Gross National Disposable Income.