What's it? Dollarization means adopting the U.S. dollar as a currency and unit of account by countries other than the United States. The term also has a broader meaning: the adoption of foreign currency by a country other than its issuing country.
International Economics
Economic Union: Deep Cooperation, Shared Prosperity (Trade, Money, Policy) – Features, Goals, Examples, Pros, Cons
What's it: An economic union is a form of regional economic integration in which goods, services, and factors flow freely between member countries. Plus, members also integrate economic policy. It is a more advanced form of the common
Infant Industry Argument: Nurturing Domestic Industries (Reasons, Criticisms, Examples)
What's it? The infant industry argument is an economic rationale used in international trade to justify trade protectionism. The idea behind this argument is that a new domestic industry is vulnerable to competition from established players in the
Import Tariffs: Taxes, Types, Impact (Pros & Cons)
What's it: An import tariff is a tax imposed on the price of imported goods. The government usually charges tariffs as a percentage of the price of imported goods. Alternatively, the tariff is levied as a fixed cost for each unit of goods imported,
Customs Union: Trade Boost & Cooperation (Free Trade, Tariffs, Pros, Cons)
What's a customs union? Imagine a group of neighboring countries taking economic integration to the next level. This involves ditching trade barriers amongst themselves, allowing goods and services to flow freely without the burden of customs duties
Trade Protection: Shield Domestic Economy (Reasons, Pros, Cons & Types)
What's it: Trade protection is a government policy used in international trade to limit the flow of exports and imports of goods and services. Protection takes various forms, such as import tariffs, subsidies, quotas, labeling, product safety, and
Pure Floating Exchange Rate: Flexibility & Volatility (Pros, Cons)
What's it? A pure floating exchange rate, or free-floating exchange rate, is a system of exchange rates in which the value of a domestic currency against a foreign currency moves according to a market mechanism. The market mechanism is the
Balance of Payments: Understanding a Country’s Economic Footprint
Balance of payments acts as a comprehensive snapshot of a country's economic activity on the world stage. It's essentially a double-entry bookkeeping system that tracks all financial transactions between a country and the rest of the world over a
Currency Crisis Explained: Causes, Impacts & Solutions
What's it: A currency crisis is a situation in which the exchange rate of a currency falls, causing a sharp decline in foreign reserves. The fall was possible due to a brief bout of speculation on the foreign exchange market. Simultaneously, the
Import Quota: Protection vs. Price Hikes – Types, Pros and Cons
What's it? An import quota is an import policy that limits the quantity of product imports over a certain period. The government implemented it to protect domestic industries that were vulnerable to pressure from imported products. It is also
Trade Restriction: Impact on Consumers & Businesses (Reasons, Types)
What's is: Trade restriction refers to the various barriers that make the flow of goods and services between countries immobile. If the barriers come from government policies, we call it trade protection. Trade restrictions affect the demand
Foreign Direct Investment (FDI): Benefits, Drawbacks & How Countries Attract FDI
What's it: Foreign direct investment (FDI) is a type of capital flow where investors from outside a country invest in its productive assets. Investors can come from companies or individuals. Companies they become multinational companies because they
International Trade: Your Guide to the Global Economy
International trade fuels the global economy, driving the exchange of goods and services across borders. It plays a critical role in our daily lives, from the smartphone in your pocket to the clothes on your back. But how exactly does international
Exchange Rate Systems: Fixed vs. Floating & Popular Variations
The exchange rate system plays a critical role in the global financial landscape, dictating how currencies are valued against each other. In essence, it's the framework a country adopts to manage its currency's exchange rate. This guide will explore
Trade Barriers Explained: Types, Why They Exist – Impacts on Economy, Consumers, Business
A trade barrier is any obstacle that limits the movement of trade flows between countries. Generally, this measure protects the domestic economy. There are various kinds of trade barriers, including tariffs, quotas, embargoes, sanctions, and
Trade Deficit: Exploring Causes & Impacts + Pros, Cons
What's is: A trade deficit occurs when the value of a country's exports is less than its imports. To finance the deficit, the country has to borrow from foreigners or sell assets (through investment inflows in the capital market, for example).
Factor Income: Understanding Its Role in GDP, GNP, and Balance of Payments
Factor income plays a fundamental role in understanding a country's economic output and the well-being of its citizens. It refers to the earnings generated by the essential ingredients used to produce goods and services – the factors of production.
Division of Labor: Efficiency Engine (Specialization, Productivity)
What's it: Division of labor means dividing the work required to produce a product into different and interdependent tasks. The company breaks down a complex production system into several units. They then assign tasks and workers to each unit.
Exchange Rates Explained: Impact on Trade & Investment (Types, Determinants)
The exchange rate is the fundamental mechanism that allows countries to trade with each other. It essentially tells you how much of one currency you need to exchange to get another currency. Imagine you're an American tourist in Italy and want to buy
Floating Exchange Rates: Freedom & Fluctuations Explained Simply (Pros, Cons)
A floating exchange rate refers to an exchange rate system in which supply-demand on the foreign exchange (forex) market determines the price of a country's currency. The government does not intervene in the market at all to influence the exchange
Monetary Union: Benefits, Drawbacks & How It Works (EU Example)
A monetary union takes economic integration a step further by creating a unified currency zone. Member countries essentially agree to share a single currency, fostering deeper economic ties and potentially unlocking a range of benefits. This makes it