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Bank Interviews - Economic terms


Hyperinflation: Exceptionally high inflation rates. While there are no hard and fast guidelines, an annual inflation rate of 20% or more is likely to create hyperinflation.
Money Laundering: The attempt to conceal or disguise the ownership or source of the proceeds of criminal activity and to integrate them into the legitimate financial systems in such a way that they cannot be distinguished from assets acquired by legitimate means. Typically this involves the conversion of cash-based proceeds into account-based forms of money.
A Pigouvian tax: It is a tax levied on an agent causing an environmental externality (environmental damage) as an incentive to avert or mitigate such damage.
Portfolio investment: It is the category of international investment that covers investment in equity and debt securities, excluding any such instruments that are classified as direct investment or reserve assets.
Poverty Reduction And Growth Facility: An IMF facility known until November 1999 as the enhanced Structural Adjustment Facility (ESAF). The PRGF is available to those countries that are facing protracted balance of payments problems and are eligible to borrow on concessional terms under the International Development Association
Purchasing Power Parities (PPPs): The rates of currency conversion that equalize the purchasing power of different currencies by eliminating the differences in price levels between countries. In their simplest form, PPPs are simply price relatives which show the ration of the prices fin national currencies of the same good or service in different countries.
Inflation Gap: An inflationary gap, also termed an expansionary gap associated with a business cycle expansion, especially the latter stages of an expansion. This is one of two alternative output gaps that can occur when short-run production differs from full employment. The other is a recessionary gap.
Quantitative Restrictions: Specific limits on the quantity or value of goods that can be import4ed (or exported) during a specific time period.
Insider Trading: The buying and selling of corporate stock or other financial instruments based on knowledge that is not widely available to the general public. Insider trading is most often undertaken by corporate executives or directors using information that they have acquired by working “inside” the company. Insider trading is illegal because it gives an unfair advantage to those on the inside.
Refinancing: It refers to the extension of a new loan to enable the repayment of all or part of the amounts outstanding on earlier borrowing, possible including amounts not yet due.
Re-exports; Are foreign goods exported in the same state as previously imported, from the free circulation area, premises for inward processing of industrial free zones, directly to the rest of the world and from premises for customs warehousing or commercial free zones, to the rest of the world.
Reverse investment: Refers to the acquisition by a direct investment enterprises of a financial claim on its direct investor. Because direct investment is recorded on a directional basis, capital invested by the direct investor as an offset to capital invested in the direct investment enterprises by a direct investor and its related enterprises, except in instances when the equity participations are at least 10 percent in both directions.
Revolving credit: Refers to credit with a clause for automatic renewal under certain conditions.
Risk-weighted assets: Refer to a concept developed by the BCBS for the capital adequacy ratio. Assets are weighed by factors representing their riskness and potential for default.
A real-time gross settlement system (RTGS): It is a settlement system in which processing and settlement take place on an order-by-order basis (without netting ) in real time (continuously).
Rules of origin: Laws, regulations and administrative procedures which determine a product’s country of origin. A decision by a customs authority on origin can determine whether a shipment falls within a quota limitations, qualifies for a tariff preference or is affected by an anti-dumping duty. These rules can vary from country to country.
A forward exchange rate: It is the exchange rate in contract for receipt of and payment for foreign currency at a specified date usually for 30 days, 90 days or 180 days in the future, at a stipulated current or ‘spot’ price.
Abnormal Returns: Used in the context of stock returns; abnormal returns means the return to a portfolio in excess of the return to a market portfolio. Abnormal returns can be negative.
Philips Curve: The Philips curve is a relation between inflation and unemployment follows from William Philips’ 1958 work on the relation between unemployment and the rate of change of money wage rates in the United Kingdom.

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