globalisation, trade & exchange rates

What is globalisation?

The process by which countries become increasingly interconnected through international trade, cross-border investment and movements of labour, capital, technology and information.

What is protectionism?

Government policies that restrict international trade to protect domestic industries from foreign competition, using measures such as tariffs and quotas.

What is free trade?

International trade conducted without government-imposed trade barriers such as tariffs and quotas.

What is a tariff?

A tax imposed on imported goods, increasing their price in the domestic market.

What is comparative advantage?

The ability of a country to produce a good or service at a lower opportunity cost than another country.

What is export competitiveness?

The ability of a country's goods and services to compete successfully in international markets based on price and non-price factors.

What is the Balance of Trade (BOT)?

The difference between the value of a country's exports of goods and imports of goods.

BOT = Exports of goods − Imports of goods

What is an exchange rate?

The price of one currency expressed in terms of another currency.

What is currency appreciation?

An increase in the value of a country's currency relative to foreign currencies.

What is currency depreciation?

A decrease in the value of a country's currency relative to foreign currencies under a floating exchange rate system.

What is the Marshall–Lerner Condition?

The condition that currency depreciation improves the trade balance if the sum of the absolute PEDs of exports and imports exceeds one, under the standard assumptions.

|PEDx| + |PEDm| > 1

What is Foreign Direct Investment (FDI)?

Investment by a foreign entity into productive assets or businesses in another country, involving a lasting interest or degree of control.