Global Economy Glossary A to D: Plain-English Definitions

About this page

Finance is full of terms that sound simple until you have to use them. This page is a plain-English glossary for Global Economy, covering entries such as Absolute advantage, Administered rates, ADR, Aged break, Agglomeration effect, each with a short definition and a pointer to the part of the volume where it is explained.

Keep it open while you read, or use it to settle an argument about what a term really means. Every entry is written to stand on its own, with no jargon left undefined, and the part number beside it tells you where to read more. Use it as a quick reference whenever a term trips you up.

A sample of the entries (98 terms on the full page)

Absolute advantage — Being able to produce a good with fewer resources than another producer; it does not by itself decide who should specialize in what.

Agglomeration effect — The gain firms and workers get from locating near one another, which makes technology clusters self-reinforcing and hard to copy.

Ample reserves — The Fed’s operating regime since 2019, in which banks hold so many reserves that short-term rates are controlled through administered rates rather than daily changes in the supply of reserves.

Authorized participant — A large dealer that can create or redeem ETF shares directly with the fund, which keeps the ETF price close to NAV.

Barter — Direct exchange of goods or services with no money involved; it needs a double coincidence of wants, which is why societies invented money.

Bear market — A prolonged period of falling prices and fearful sentiment, conventionally a fall of 20% or more from a peak; the opposite of a bull market.

Bond — A loan you can buy and sell: the issuer, a government or company, pays interest (the coupon) and repays the principal at maturity. Bond prices and interest rates move in opposite directions.

Broad money — Wider measures of money that add bank deposits, savings balances and money fund holdings to currency, such as M2 in the US or M3 in India.

Buyback — A company repurchasing its own shares; it raises earnings per share by shrinking the share count even if profit does not grow.

Capital expenditure — Spending on long-lived assets such as buildings and servers (capex); it is recorded as an asset and reaches profit gradually through depreciation.

Carry trade — Borrowing in a low-interest currency to invest in a higher-yielding one; it pays steadily until the funding currency rises sharply.

CDO — Collateralized debt obligation: a structured product that bundles debt, often mortgage-backed securities, into slices (tranches) with different risk levels; mispriced CDOs spread the 2008 losses worldwide.

Chiang Mai Initiative Multilateralisation — A $240 billion network of currency swaps among the ASEAN+3 countries, in force since March 24, 2010, built after the 1997 Asian crisis.

Client Money and Assets Return — The monthly report that larger UK firms file with the FCA on the client money and assets they hold.

Conditionality — The policy reforms, such as tax rises and central-bank independence, that the IMF requires in exchange for lending.

Correspondent banking — The network of accounts banks hold with one another across borders, through which cross-border payments actually move.

CPI — Consumer price index: the most common inflation measure, tracking the price of a representative basket of household purchases weighted by spending; in the United States it comes from the Bureau of Labor Statistics.

Critical minerals — Minerals essential to electrification and energy technology, such as lithium, copper, nickel, cobalt, graphite and rare earths, whose supply is highly concentrated.

Custodian — A bank that safekeeps clients’ securities segregated from its own balance sheet, settling their trades and collecting dividends.

Debt restructuring — An agreement in which creditors accept losses and longer maturities so that a country’s debt becomes payable.

Deflation — A general fall in prices over time, the opposite of inflation. It can be dangerous because falling prices encourage buyers to delay spending, which can feed a spiral of weaker demand and rising unemployment.

Demographic dividend — The growth boost an economy gets when working-age people rise as a share of the population.

Derivatives — Financial contracts whose value comes from an underlying asset such as a stock, commodity, interest rate or currency; futures, options, swaps and forwards are the main types, used for hedging and for speculation.

Double coincidence of wants — The barter requirement that each trader has exactly what the other wants at the same moment; money removes it.

Duration — A bond’s sensitivity to interest rates, in years: a 6.2-year duration means a 1-point rise in yields cuts the price by roughly 6.2%.