Exchange rateIn finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of the euro. The exchange rate is also regarded as the value of one country's currency in relation to another currency. For example, an interbank exchange rate of 131 Japanese yen to the United States dollar means that ¥131 will be exchanged for or that will be exchanged for ¥131.
Foreign exchange marketThe foreign exchange market (forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all aspects of buying, selling and exchanging currencies at current or determined prices. In terms of trading volume, it is by far the largest market in the world, followed by the credit market. The main participants in this market are the larger international banks.
Purchasing power parityPurchasing power parity (PPP) is a measure of the price of specific goods in different countries and is used to compare the absolute purchasing power of the countries' currencies. PPP is effectively the ratio of the price of a basket of goods at one location divided by the price of the basket of goods at a different location. The PPP inflation and exchange rate may differ from the market exchange rate because of tariffs, and other transaction costs.
Price indexA price index (plural: "price indices" or "price indexes") is a normalized average (typically a weighted average) of price relatives for a given class of goods or services in a given region, during a given interval of time. It is a statistic designed to help to compare how these price relatives, taken as a whole, differ between time periods or geographical locations. Price indices have several potential uses. For particularly broad indices, the index can be said to measure the economy's general price level or a cost of living.
Consumer price indexA consumer price index (CPI) is a price index, the price of a weighted average market basket of consumer goods and services purchased by households. Changes in measured CPI track changes in prices over time. The CPI is calculated by using a representative basket of goods and services. The basket is updated periodically to reflect changes in consumer spending habits. The prices of the goods and services in the basket are collected monthly from a sample of retail and service establishments.
Purchasing powerPurchasing power is the amount of goods and services that can be purchased with a unit of currency. For example, if one had taken one unit of currency to a store in the 1950s, it would have been possible to buy a greater number of items than would be the case today, indicating that the currency had a greater purchasing power in the 1950s. If one's monetary income stays the same but the price level increases, the purchasing power of that income amount falls.
Relative purchasing power parityRelative Purchasing Power Parity is an economic theory which predicts a relationship between the inflation rates of two countries over a specified period and the movement in the exchange rate between their two currencies over the same period. It is a dynamic version of the absolute purchasing power parity theory. A reason for the prominence of this concept in economic research is the fact that most countries publish inflation data normalized to an arbitrary year, but not absolute price level data.
Price levelThe general price level is a hypothetical measure of overall prices for some set of goods and services (the consumer basket), in an economy or monetary union during a given interval (generally one day), normalized relative to some base set. Typically, the general price level is approximated with a daily price index, normally the Daily CPI. The general price level can change more than once per day during hyperinflation.
Interest rate parityInterest rate parity is a no-arbitrage condition representing an equilibrium state under which investors interest rates available on bank deposits in two countries. The fact that this condition does not always hold allows for potential opportunities to earn riskless profits from covered interest arbitrage. Two assumptions central to interest rate parity are capital mobility and perfect substitutability of domestic and foreign assets.
Real interest rateThe real interest rate is the rate of interest an investor, saver or lender receives (or expects to receive) after allowing for inflation. It can be described more formally by the Fisher equation, which states that the real interest rate is approximately the nominal interest rate minus the inflation rate. If, for example, an investor were able to lock in a 5% interest rate for the coming year and anticipated a 2% rise in prices, they would expect to earn a real interest rate of 3%.
Interest rateAn interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, the compounding frequency, and the length of time over which it is lent, deposited, or borrowed. The annual interest rate is the rate over a period of one year. Other interest rates apply over different periods, such as a month or a day, but they are usually annualized.
Foreign exchange reservesForeign exchange reserves (also called forex reserves or FX reserves) are cash and other reserve assets such as gold held by a central bank or other monetary authority that are primarily available to balance payments of the country, influence the foreign exchange rate of its currency, and to maintain confidence in financial markets. Reserves are held in one or more reserve currencies, nowadays mostly the United States dollar and to a lesser extent the euro.
Fisher effectIn economics, the Fisher effect is the tendency for nominal interest rates to change to follow the inflation rate. It is named after the economist Irving Fisher, who first observed and explained this relationship. Fisher proposed that the real interest rate is independent of monetary measures (known as the Fisher hypothesis), therefore, the nominal interest rate will adjust to accommodate any changes in expected inflation.
Multivariate normal distributionIn probability theory and statistics, the multivariate normal distribution, multivariate Gaussian distribution, or joint normal distribution is a generalization of the one-dimensional (univariate) normal distribution to higher dimensions. One definition is that a random vector is said to be k-variate normally distributed if every linear combination of its k components has a univariate normal distribution. Its importance derives mainly from the multivariate central limit theorem.
European integrationEuropean integration is the process of industrial, economic, political, legal, social, and cultural integration of states wholly or partially in Europe or nearby. European integration has primarily come about through the European Union and its policies. In antiquity, the Roman Empire brought about integration of multiple European and Mediterranean territories. The numerous subsequent claims of succession of the Roman Empire, even the iterations of the Classical Empire and its ancient peoples, have occasionally been reinterpreted in the light of post-1950 European integration as providing inspiration and historical precedents.
Normal distributionIn statistics, a normal distribution or Gaussian distribution is a type of continuous probability distribution for a real-valued random variable. The general form of its probability density function is The parameter is the mean or expectation of the distribution (and also its median and mode), while the parameter is its standard deviation. The variance of the distribution is . A random variable with a Gaussian distribution is said to be normally distributed, and is called a normal deviate.
Asymptotic theory (statistics)In statistics, asymptotic theory, or large sample theory, is a framework for assessing properties of estimators and statistical tests. Within this framework, it is often assumed that the sample size n may grow indefinitely; the properties of estimators and tests are then evaluated under the limit of n → ∞. In practice, a limit evaluation is considered to be approximately valid for large finite sample sizes too. Most statistical problems begin with a dataset of size n.
Regional integrationRegional Integration is a process in which neighboring countries enter into an agreement in order to upgrade cooperation through common institutions and rules. The objectives of the agreement could range from economic to political to environmental, although it has typically taken the form of a political economy initiative where commercial interests are the focus for achieving broader socio-political and security objectives, as defined by national governments.
Personality testA personality test is a method of assessing human personality constructs. Most personality assessment instruments (despite being loosely referred to as "personality tests") are in fact introspective (i.e., subjective) self-report questionnaire (Q-data, in terms of LOTS data) measures or reports from life records (L-data) such as rating scales. Attempts to construct actual performance tests of personality have been very limited even though Raymond Cattell with his colleague Frank Warburton compiled a list of over 2000 separate objective tests that could be used in constructing objective personality tests.
