- Industri: Economy; Printing & publishing
- Number of terms: 15233
- Number of blossaries: 1
- Company Profile:
An approach to business based on looking after yourself by looking out for your own. At least until the crisis of the late 1990s, some Asian companies, and even governments, were notable for awarding contracts only to family and friends. This was often a form of corruption, resulting in economic inefficiency.
Industry:Economy
A lender, whether by making a loan, buying a bond or allowing money owed now to be paid in the future.
Industry:Economy
When banks suddenly stop lending, or bond market liquidity evaporates, usually because creditors have become extremely risk averse.
Industry:Economy
Making loans. Often the amount of credit creation is subject to regulation. Lenders may have limits on the amount of loans they can make relative to the assets they have, so that they run little risk of bankruptcy (see Basel 1 and 2 and capital adequacy ratio). A central bank tries to keep the amount of credit creation below the level at which it would increase the money supply so much that inflation accelerates. This was never easy to get right even when most lending was by banks, but it has become much harder with the recent growth of non-bank lending, such as by credit-card com¬panies and retailers. Missing text.
Industry:Economy
A loan extended or (sometimes) taken by, for example, delayed payment of an invoice.
Industry:Economy
A method of reaching economic decisions by comparing the costs of doing something with its benefits. It sounds simple and common-sensical, but, in practice, it can easily become complicated and is much abused. With careful selection of the assumptions used in cost-benefit analysis it can be made to support, or oppose, almost anything. This is particularly so when the decision being con templated involves some cost or benefit for which there is no market price or which, because of an externality, is not fully reflected in the market price. Typical examples would be a project to build a hydroelectric dam in an area of outstanding natural beauty or a law to require factories to limit emissions of gases that may cause ill-health. (See shadow price. )
Industry:Economy
The amount a firm must pay the owners of capital for the privilege of using it. This includes interest payments on corporate debt, as well as the dividends generated for shareholders. In deciding whether to proceed with a project, firms should calculate whether the project is likely to generate sufficient revenue to cover all the costs incurred, including the cost of capital. Calculating the cost of equity capital can be tricky (see capital asset pricing model and beta).
Industry:Economy
Being corrupt is not just bad for the soul, it also harms the economy. Research has found that in countries with a lot of corruption, less of their GDP goes into investment and they have lower growth rates. Corrupt countries invest less in education, a sector of the economy that pays big economic dividends but small bribes, than do clean countries, thereby reducing their human capital. They also attract less foreign direct investment. There is no such thing as good corruption, but some sorts of corruption are less bad than others. Some economists point to similarities between bribery and paying taxes or buying a license to operate. Where it is predictable – where the briber knows what to pay and can be sure of getting what it pays for--corruption harms the economy far less than where it is capricious. The absence of corruption has huge economic benefits, however, by allowing the development of institutions that enable a market economy to function efficiently. In many of the world’s more corrupt countries, the distinction between private interest and public duty is still unfamiliar. Countries that have made graft the exception rather than the rule in the conduct of public affairs have been helped to grow by the emergence of institutions such as an independent judiciary, a free press, a well-paid civil service and, perhaps crucially, an economy in which firms have to compete for customers and capital.
Industry:Economy
A market in which an inefficient firm, or one earning excess profits, is likely to be driven out by a more efficient or less profitable rival. A market can be contestable even if it is dominated by a single firm, which appears to enjoy a monopoly with market power, and the new entrant exists only as potential competition (see antitrust).
Industry:Economy
The domino effect, such as when economic problems in one country spread to another. (See Asian crisis. )
Industry:Economy
