Asian Financial Crisis

• Occured in 1997 following collapse of the Thai currency against the US dollar
• During the 1990s these countries became dependent upon exports, which made them more susceptible to currency movement. 
• Investors sold the local currency due to their concerns about the exchange rate
• This began a financial contagion across the region as other currencies became suspect in countries such as South Korea, Indonesia, and Malaysia. 
• This event caused these nations to rethink their policies concerning captail outflows. 

Balance Payments

• Summary of countries international interactions with the rest of the world over a specific period of time. 
• With all components included the balance of payments should always balance to equal 0. 
• Two parts to BoP

1. current account-records the sum of the flows of goods between one country and the rest of the world. 
2. capital account-records the movement of short and long term capital. 

Creative Destruction

• The notion behind the free market's ability to create progress
• This idea encapsulates the notion that the marketplace destroys bad business in order for the strongest to survive and allow for better enterprises to develop. 
• This pattern moves society forward. 
• An example of this can be the downfall of the cassette tape in favor of the creation of CDs. 

Derivatives

• Financial instruments derived from securities such as futures options and bonds. 
• they are contracts between two parties that specifies conditions under which payments and payoffs are to be made.
• insure businesses and individuals against the risk of falling or rising prices (230). 
• traders use them to make money by betting on the value of the product at some time in the future. 

Export Processing Zones

• an industrial zone that produces goods for export that has been designated free of all duties and taxes by the government 
• Attractive to foreig investment since they offer low wage labor with minimal external costs

Dollarization 

• The replacement of national currency with a foreign currency. 
• two ways 

1. De facto- national currency still exists parallel to the foreign currency 
2. De Jures- occurs by law where the national currency is replaced by the foreign one

• Countries do this to have safer currency and facilitate trading relationships with a dominant economic partner

Foreign Direct Investment

• investments made outside of the home country of the investing company in which control over the resourcs transferred remains wiht the investor
• This investment bring assets, tech, managment skills, and access to markets
• FDI not common before WWII
• FDIs have been a major factor in China's rapid development

Commodity Futures

• A contract that is an agreement to buy or sell a commodity at a future date and at a specified price.
• Buyers use these to minimize the fluctuations in price
• Sellers used them to lock in a price for their product

Gold Standard

• Created during the 19th century when GB was in control of the world economy
• A monetary system where countries had to fix their currency against the value of gold. 

GNP

• Measures the value of the goods and services produced in one year by the citizen of a country
• This is in contrast to GDP that focuses on the production of goods and services geographically located in the country one is examining. 
• Key statistic in economic growht for a long time
• ignored variable such as social and cultural issues