International Finance Glossary

A systematic record of all monetary transactions between a country and the rest of the world over a given period.

The post-WWII international monetary system (1944-1971) based on fixed exchange rates pegged to the U.S. dollar, which was convertible to gold.

The component of the balance of payments recording capital transfers and the acquisition or disposal of non-produced, non-financial assets.

Measures taken by a government or central bank to regulate the flow of foreign capital in and out of the domestic economy.

A strategy of borrowing in a low-interest-rate currency to invest in a higher-yielding currency, profiting from the interest rate differential.

The condition that the interest rate differential between two countries equals the forward premium or discount on the exchange rate, eliminating arbitrage opportunities.

A monetary authority that issues domestic currency fully backed by foreign currency at a fixed exchange rate, relinquishing independent monetary policy.

A sudden and sharp depreciation of a nation's currency, often driven by speculative attacks and loss of confidence.

The balance of payments component recording trade in goods and services, primary income, and secondary income (transfers).

Any currency deposited in a bank outside its country of origin, such as Eurodollars (USD held outside the U.S.).

The system a country adopts for managing its currency's value, ranging from free float to fixed peg.

The balance of payments component that records transactions involving financial assets and liabilities, including FDI, portfolio investment, and reserve assets.

Cross-border investment establishing lasting interest and significant control in a foreign enterprise, typically requiring 10% or more ownership.

The global decentralized market for trading currencies, the largest and most liquid financial market in the world with daily turnover exceeding $7 trillion.

A customized agreement to exchange currencies at a predetermined rate on a specific future date, used for hedging exchange rate risk.

A monetary system in which the value of a country's currency is directly linked to a specified amount of gold.

The principle that a country cannot simultaneously achieve a fixed exchange rate, free capital mobility, and independent monetary policy.

An international organization promoting global monetary cooperation, financial stability, and providing financial assistance to countries with balance of payments problems.

The tendency for a country's trade balance to worsen initially after currency depreciation before subsequently improving.

An economic model extending IS-LM to open economies, analyzing policy effectiveness under different exchange rate regimes and capital mobility.

The theory that exchange rates should equalize the price of a basket of goods across countries in the long run.

Bonds and other debt obligations issued by a national government to domestic and international investors.

An international reserve asset created by the IMF, valued based on a basket of five major world currencies.

The current exchange rate at which a currency pair can be traded for immediate delivery.

An international financial institution providing loans and grants to developing countries for capital projects aimed at reducing poverty and promoting development.