Economic outlook, analysis and forecasts

Economics Glossary - Glossaire économique



Analytical Data Base maintained by the OECD Secretariat and underlying the projections presented in the Economic Outlook, see Economic Outlook Data Base Inventory .


Active labour market policy is a set of policies aimed at improving the functioning of the labour market by enhancing labour market mobility and adjustment, facilitating the redeployment of workers to productive activities and, generally, enabling people to seize new job opportunities as they arise.

ARCH/stochastic volatility models

ARCH/stochastic volatility models are time series models that allow for time-varying variances.


Association of Southeast Asian Nations.

Accrual accounting

Recognition in financial accounts of the implications of transactions (or decisions giving rise to transactions) when they occur irrespective of when cash is paid or received.


The acquisition of fixed assets, stocks of non-durable goods, land, mineral deposits and other non-reproducible tangible assets, financial assets, patents, copyrights and other tangible assets during a period of account less the incurrence of liabilities. This is gross accumulation. Net accumulation is gross accumulation during a period reduced by the consumption of fixed capital.


The adjustment made to equation-based projection over the forecasting period. For example, if an equation has under-predicted a variable in recent periods, then an "add factor" may be added to the equation if it is judged that the equation will under-predict over the forecast period as well. In short, add factors are equation-residuals applied over the forecast period.


The OECD Secretariat aggregates time series into regional aggregates using individual country 1995 weights in GDP or expenditure items based on 1995 purchasing power parities (PPPs). See Weighting Scheme for aggregate measures.


The distance from peak-to-trough in the business cycle. In general, the larger the amplitude is the more volatile the business cycle will be.

Annualised rate of growth - a.r.

The rate of growth over a specified period (e.g. a quarter or a half-year) expressed at an annual rate. In the OECD Economic Outlook, growth rate numbers in texts and tables are given at annual rates, unless otherwise mentioned. See also quarterly growth rates below.

Anti-dumping measures

Anti-dumping measures can be adopted after an investigation of the importing country, when dumping and material injury resulting therefrom has occurred. Dumping takes place when a product is exported at less than its normal value, i.e. the comparable price, in the ordinary course of trade, for the like product when consumed in the exporting country. Anti-dumping measures may take the form of anti-dumping duties or of price undertakings. Anti-dumping duties are generally enterprise-specific duties levied on certain goods to offset the dumping margin. Anti-dumping price undertakings may be offered to exporters to avoid the imposition of anti-dumping duties.

Appropriation accounts

Detailed sources of income and expenditures, saving and net lending for key economic sectors such as general government, businesses and households. See also National accounts below.

Asia-5 countries

The principal Asian economies affected by financial market turmoil since 1997. These include Indonesia, Korea, Malaysia, the Philippines and Thailand.



Bank for International Settlements.

Bad loans

Defined as loans which are in arrears exceeding a certain time limit and/or for which the value of collateral has been eroded or disappeared for economic reasons.

Balance sheet account

Account showing the assets, liabilities and net worth of an institutional unit, or class of such units, as of a given date.

Basis point

One one-hundredth of a percentage point, or 0.01 per cent.

Bid-ask spread

Bid-ask spread is the difference between the price buyers are willing to pay for an asset (bid) and the price sellers are asking for it.

Black-Scholes formula

Black-Scholes formula (developed by Nobel prize winners Fisher Black and Myron Scholes) prices the value of an European option on a financial asset, given its price, the exercise price, the time to maturity, the risk-free interest rate and the asset’s expected standard deviation/volatility.


A promissory note or debt security issued by a debtor, such as a government agency, local government, or a corporation, to a creditor, in a fixed amount and for a specified period. An interest bearing bond is where the debtor agrees to repay the principal amount plus a given rate of interest when the bond matures. A discounted bond is sold at a discount of its face value, such that the creditor receives a given rate of return through price appreciation upon repayment of the bond at face value.

Budget balance

See general government financial account  below and notes to Annex Table 27 .

Built-in agenda

Agreed under the Uruguay Round were a range of selective negotiations, in the areas of trade in agriculture, trade in services and aspects of intellectual property that would continue regardless of whether there was a subsequent round of global trade talks.

Business cycle

There are many ways to measure "the business cycle". In general, it is defined as fluctuations in the level of economic activity about a particular estimated measure of its underlying trend. Starting from a position where the level of output is around the trend level, a business cycle is said to be complete when the level of activity has returned back to the trend following a period of cycling above then below the trend level, or vice-versa.

Business sector output

Total economic output of the economy less the activities of the general government sector, that is general government consumption and gross capital formation.



Commonwealth of Independent States. Initially made up of Russia and the other Newly Independent States of the former Soviet Union.

Capital adequacy rules

The minimum amount of capital (equity) that institutions must hold relative to their assets set by financial market regulators. These rules are designed to ensure that capital is sufficient to absorb likely losses. It was agreed at the Bank for International Settlements in 1988 that the minimum ratio of capital to risk-adjusted assets for international banks should be 8 per cent.

Capital gain or loss

Increases or decreases in the value of the assets of institutional and other units which are due to changes in market prices, discovery of new mineral deposits and other natural resources, natural growth of timber, depletion mineral deposits, unforeseen obsolescence, theft, major catastrophes and other events except the purchase and sale of assets, the normal wear and tear, accidental damage, losses in tangible assets, the writing off of bad debts and other flows which are recorded in the transaction accounts.

Capital transaction account

The standard account relating to the transactions of the nation with the rest of the world in respect of financial assets and liabilities and other sources of the finance of gross accumulation.

Capital transfers

Unrequited transfers which are designed to finance the gross capital formation, other forms of accumulation, or long-term expenditure of the recipient.


Defined as the difference between return on securities held and financing costs, and "carry trade" refers to institutions and businesses taking advantage of this differential. A positive/negative carry occurs when the financing cost is less/more than the yield on securities that are being financed.

Cash basis

Method of accounting where entries, for example, outlay, income, other receipt, are recorded as of the time at which the payment is actually made or received.

Central government

Defined as comprising all departments, offices, establishments and other bodies classified under general government, which are agencies or instrument of the central authority of a country, except separately organised social security funds irrespective of whether they are covered in, or financed through, ordinary or extraordinary budgets, or extra-budgetary funds. Central government financial balance, see notes to Annex Table 59 .

Central projection

A projection of the most likely outcome, but not always one where risks are considered evenly spread on the upside and the downside.

Certificate of deposit - CD

A form of interest bearing time deposit at a bank or savings institution which cannot be withdrawn before a specified maturity date without being subject to an interest penalty.

Chained index weighting

This is an alternative way of weighting together the sub-aggregates that form GDP. The key difference to the fixed-weight aggregation, used in most countries, is that the prices are continuously updated and that "substitution bias" is avoided and that measures are independent of the choice of base year. For further details see notes to Annex Table 1 .

Cif value

The value in the market at the customs frontier of a country of her imports of merchandise, other goods, etc., including all charges for transporting and insuring the goods from the country of export to the given country but excluding the cost of unloading from the ship, aircraft, etc., unless it is borne by the carrier.


Goods and services normally intended for sale on the market at a price that is designed to cover their cost of production. Includes all goods and services produced by industries, all imported goods and services except direct purchases abroad by government and households, and that part of the gross output of producers of government services and a private non-profit services to households which is sold on the conditions, characteristic of sales of commodities.

Compensation of employees

All payments by resident producers of wages and salaries to their employees, in kind and in cash, and of contributions, paid or imputed, in respect of their employees to social security schemes and to private pension, family allowance, casualty insurance, life insurance and similar schemes.

Competition policies

Antitrust and related policies (e.g., intellectual property regulations) designed to foster or restrict competition and which may have an impact on foreign trade and investment.


A measure of a country's advantage or disadvantage in selling its products in international markets. The OECD Secretariat calculates two different measures of competitiveness based on the differential between domestic and competitors' unit labour costs in manufacturing and consumer prices both expressed in a common currency. (For further detail see notes to Annex Tables 42 and 43 .) The OECD also produces indices of nominal effective exchange rates (Annex Tables 36 ). Competitiveness indicators are currently calculated for twenty-eight OECD countries, the seven Dynamic Asian Economies and five major emerging market countries (Argentina; Brazil; China; India; and Russia since 1993). Forty-four export markets are considered: 28 OECD countries, twelve non-OECD countries and four zones.

Consolidation (of government debt)

This is a means of presenting government accounts in which, where a liability of a government-sector agency and institution is held as an asset somewhere else in the government sector. Debt data shown in Economic Outlook are consolidated to the largest possible extent, given data limitations.

Constant price estimates

In theory, the price and quantity components of a value may be identified and base periods prices are substituted for those of the current period. Methods are used in practice to calculate variables at constant prices. Another method, commonly referred to as price deflation, involves dividing price indexes into the observed values to obtain volume estimates. The price indexes used are constructed from prices of the major items of each value.

Consumer durables

Goods acquired by households which have an expected lifetime of more than one year and a relatively high value, such as motor cars, refrigerators and washing machines.

Consumption of fixed capital

The value of the reproducible fixed assets, at current replacement cost, that is used up as a result of normal wear and tear, foreseen obsolescence and the normal rate of accidental damage. Unforeseen obsolescence, main catastrophes and the depletion of natural resources are not taken into account, and roads, dams and other forms of construction other than structures of the producers of government services are also excluded.


Disturbances in financial markets in one country or region triggering off a financial crisis in other countries and regions.

Corporate enterprises

Defined as corporations, joint stock companies, co-operatives, limited liability partnerships and other financial and non-financial enterprises which by virtue of legislation, administrative regulations or registration, are recognised as business entities independent of their owners.

Correlation coefficient

A measure of the degree to which two variables tend to move together. The coefficient has a value between plus and minus 1, which indicates the strength and direction of association.

Countervailing measures

Measures that can be undertaken whenever an investigation, by the investigating authority of the importing country, has led to the determination that the imported goods are benefiting from subsidies, and that they result in an injury. Countervailing measures may take the form of countervailing duties or undertakings by the exporting firms or by the authorities of the subsidising country.

Country classification

Groupings of countries used by the OECD Secretariat. See Country classification.

Cross-correlation of business cycles

A measure of how closely aligned the timing of movements in activity are for two countries over their business cycles. The cross-correlation statistic for two economic time series can range from -1 to 1. In general, the closer the cross-correlation is to value of 1 the more in phase and synchronised the business cycles will be. A value of -1 would indicate that the two series move perfectly in a counter-cyclical direction. A value near zero indicates that there is no statistical relationship between the series.

Current account balance

Summary measure of a country's foreign trade and payments, see notes to Annex Table 50 .

Current account discrepancy

Discrepancy arising from uneven global recording of exports and imports.

Cyclically-adjusted budget balance

See notes to Annex Table 29.

Cyclically-adjusted financial balance

See notes to Annex Table 28 and 30 .

Cyclically-adjusted general government balance

See notes to Annex Table 28 .


Debt-equity ratio

Total liabilities of a firm divided by total shareholder equity.


Defined as sustained fall in the general price level.

Demand deposits

Funds deposited at a depository institution that are payable on demand (immediately or within a very short period). The most common forms of demand deposits are checking accounts. See monetary aggregates below.

Derivative security

A security whose value depends on the value of other basic underlying securities. Examples are futures and options, which are traded on organised exchanges, and forward contracts, swaps and other types of options, which are regularly traded outside of organised exchanges in what are termed over-the-counter markets.

Direct taxes on income

Levies by public authorities at regular intervals, except social contributions, on income from employment, property, capital gains or any other source. Real estate and land taxes are included if they are merely an administrative procedure for the assessment and collection of income tax.

Discount rate

The interest charged by a central bank on loans to domestic financial institutions.

Disposable income

The income of the nation, institutional units e.g. households, etc., from all sources after deduction of all current transfers paid. It is equivalent to the national income at market prices plus net current transfers other than property and entrepreneurial income received.

Domestic factor incomes

The compensation of employees and operating surplus originating in domestic production; in other words, included in the valued added of resident producers.

Domestic product

See GDP  (Gross domestic product) below.

Dynamic Asian Countries

Country grouping comprising Chinese Taipei; Hong Kong China; Indonesia; Malaysia; the Philippines; Singapore and Thailand (see Country classification   ).



European Central Bank within the European Economic and Monetary Union.


Economic and Monetary Union.


Employment Protection Legislation. Employment protection legislation refers to both regulations concerning hiring (e.g. conditions for using fixed or temporary contracts, training requirements) and firing (e.g. redundancy procedures, severance payments).


Exchange Rate Mechanism.


European Standard Accounts 1995. See National accounts  below andnote to Annex Table 1 .


European Union. Comprises 25 countries: Austria, Belgium, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.

Earnings per share

A company's profit divided by the total shares outstanding.

Economic and Monetary Union

The third stage of European economic and monetary union came into effect 1 January 1999, with the launch of the euro. Eleven countries participate from the start: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain. On 1 January 2001, Greece joined.

Effective exchange rate

Nominal (effective exchange rates), a composite index of the value of the domestic currency. More specifically, it is the exchange rate of the domestic currency vis-à-vis other currencies weighted by their share in either the country's international trade or payments. See notes to Annex Table 37 . Real (effective exchange rates), takes account of price level differences between trading partners. Movements in the real effective exchange rate provide an indication of the evolution of a country's aggregate external price competitiveness.


Measures the responsiveness of one variable to changes in some other variable.


All persons engaged in the activities of business units, government bodies and private non-profit institutions, except the proprietors and their unpaid family members in the case of unincorporated business. Members of the armed forces are included, irrespective of their duration and type of their service.


See notes to Annex Table 20 to 22 .

Endogenous variables

Designates variables in an economic/econometric model that are explained, or predicted, by that model. See also exogenous variables  below.

Entrepreneurial income

The income of an enterprise from production (operations) and property, including the ownership of other enterprises, less the property income payable by the enterprise except dividends.

Estimations à prix constants

En théorie, les composantes de prix et de quantité d'une valeur sont identifiées et le prix de la période de référence se substitue à celui de la période courante.

Euro Area

The 16 EU countries that by 2009 have adopted the Euro (Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia and Spain).


US dollar deposits held by various financial institutions outside of the United States. While the market for dollars in circulation outside the United States emerged in Europe in the 1960's , dollar deposits are now found around the world. More recently, a similar Eurocurrency market has been developing around the world.

Exchange rate (nominal)

The price of one currency in terms of another. For example, on 1 January 1999, the cost of one euro was 1.16 US dollars, while the price of one dollar was 0.86 euros. See notes to Annex Table 36 .

Exercise price

Exercise price is the pre-specified price at which the security underlying a futures or option contract may be bought or sold on the contract’s expiration date.

Exogenous variables

Designates variables that appear in an economic/econometric model, but are not explained by that model (i.e. they are taken as given by the model). See also endogenous variables  above.


Factor incomes

Comprises compensation of employees by, and operating surplus of, producers.

Financial accelerator

Refers to response of credit market conditions to "shocks" to the economy that may amplify and spread the effect of the shocks. For example, credit may become harder to obtain for households and firms in an economic downturn, which can make the downturn more severe and prolonged.

First-order auto-correlation

A measure of to what extent the level of economic activity currently depends upon the level in the past. The higher the degree of dependence the longer or more persistent the business cycle will be.

Fiscal consolidation

Policy aimed at reducing government deficits and debt accumulation.

Fiscal drag

The (endogenous) effect of changes in economic activity and incomes on tax revenues due to the progessivity of the tax system.

Fob value

The market value at the customs of exports of merchandise and other goods, including all costs of transporting of goods to the customs frontier, export duties and the cost of loading the goods on to the carrier unless the latter cost is borne by the carrier.

Foreign direct investment

A foreign investment is classified as a direct investment if the foreign investor holds at least 10 per cent of the ordinary shares or voting rights in an enterprise and exerts some influence over its management. There are some limitations with this measure, which are related to the concept and the definition. First, direct investment flows do not include investment via the host country’s capital market or via other financial sources which do not pass through the investor country. Second, a number of foreign investors may hold a majority stake in some companies, although each may own less than 10 per cent of ordinary shares. These investments may not be counted, and it will then be considered that the companies are controlled by nationals of the country concerned. And capital flows via holding companies may artificially inflate investment flows when this capital simply enters and leaves a country. Concerning the definition, some countries adopt a threshold different from 10 per cent for distinguishing foreign direct and portfolio investment. Comparisons of data between countries can be misleading since data collection is based on different accounting practices.

Foreign exchange reserves

The stocks of foreign currency denominated assets plus, in a number of cases, gold, held by at a central bank.

Forward contract

An agreement, not traded on an exchange, between two parties for the delivery of an asset at a future date.

Frequency ratio

The proportion of national tariff lines that are affected by a particular non-tariff barrier or by a specified group of non tariff barriers, irrespective of whether the products affected are actually imported.

Futures contract

A standardised and securitised derivative investment, involving the delivery of a commodity at an agreed price at a future date. Futures contracts are used for speculation, hedging, and arbitrage purposes.

Futures market

A commodities market where futures contracts are issued.



The General Agreement on Tariffs and Trade.


Gross domestic product is the value-added produced in the domestic economy regardless of the origin of the production factors. See also GNP and National accounts  below and notes to Annex Tables 1 and 2 .


Government Financial Statistics. Accounting framework developed by the International Monetary Fund to provide guidelines for the compilation of fiscal accounts. See also National accounts below.


Gross national product is the value-added produced by national factors of production irrespective of their physical location (see GDP  above).

General government account

Consolidated central, state and local government accounts, social security funds and non-market non-profit institutions controlled and mainly financed by government units. See also notes to Annex Tables 25-33 .

General government primary balance

See notes to Annex Table 29.

Government gross debt

All financial liabilities of general government, typically mainly in the form of government bills and bonds. Government gross debt as defined in the national accounts is reported in Annex Table 32 . Government debt as defined in the Maastricht Treaty, the government debt definition to be applied under the Maastricht Treaty, specified in the EC Council Regulation No. 3605/93, December 1993, see notes to Annex Table 60 .

Government net debt

All financial liabilities minus all financial assets of general government. Financial assets of the general government sector have a corresponding liability existing outside that sector. The exceptions are monetary gold and Special Drawing Rights, financial assets for which there is no counterpart liability. Monetary gold and Special Drawing Rights may be included as assets of the general government sector or they may be classified as assets of the central bank, at the discretion of the government. See notes to Annex Table 33 .


Hedge fund

A pooled investment vehicle that is privately organised and is administered by professional investment managers. It is different from another pooled investment fund, the mutual fund, in that access is available only to wealthy individuals and institutional managers. Moreover, hedge funds are able to sell securities short and buy securities on leverage, which is consistent with their typically short-term and high risk oriented investment strategy, based primarily on the active use of derivatives and short positions. US hedge funds are exempt from Securities and Exchange Commission reporting requirements, as well as from regulatory restrictions concerning leverage or trading strategies.


The use of financial instruments, such as futures contracts, to offset the risk in an investment portfolio, as an increase in the value of the hedging instrument will offset declines in the other assets.

Historic volatility

Historic volatility is the standard deviation of financial returns on an asset computed over a window of a pre-specified number of past trading dates.

Holding period

Holding period is the time interval during which an asset is held.

Household saving

Household sector saving as a per cent of household sector disposable income, see notes to Annex Table 23 .



International Labour Organisation.


International Monetary Fund.


The OECD's world econometric model, see the Note on model use .

Implied volatility

Implied volatility is the value of the expected volatility imputed from an option pricing model such as the Black-Scholes formula, given the option price, the asset’s price, the exercise price, the time to maturity, and the risk-free interest rate.

Import coverage ratio

The share (or percentage) of a country's own imports that is subject to a particular non tariff barrier, or any one of a specified group of non tariff barriers. They are calculated by attaching actual values to bilateral trade flows between various exporters and the importing country. The import coverage ratio suffers from the drawback that those products facing very restrictive non-tariff barriers enter the calculation with low weights. A further drawback of the ratio is that, in common with the frequency ratio, it captures the effects of relaxation of NTBs only insofar as such measures are completely eliminated. In situations where NTBs are not eliminated, the import coverage ratio may even give perverse results, which is not the case with the frequency ratio.

Import quotas

Restrictions on the quantity and or value of imports of specific commodities for some given time period, which are administered globally, selectively or bilaterally.

Indicator models

An econometric approach to estimate quarterly GDP growth from monthly data. For further information see the note on On model use .

Indirect taxes

Taxes levied by producers on production, sale, purchase or use of goods and services.

Industrial production index

Index of production in mining, manufacturing and public utilities (electricity, gas and water), but excludes construction. The exact coverage, the weighting system and the methods of calculation vary from country to country but the divergences are less important than e.g. in the case of the price and the wage indices.

Interbank overnight lending market

A market where depository institutions buy or sell funds needed to meet a reserve requirement at the end of the trading day. In this market, banks can sell their excess reserves to other banks with insufficient reserves at the overnight inter-bank lending rate. The central bank typically serves as the institutional basis of the overnight lending market. Should demand for funds exceed/fall short of expectations - reflected also in a sharp movement in the market determined overnight lending rate - the central bank may increase/decrease liquidity in the system. Periodically, the central bank may reduce/raise the target overnight lending rate in order to signal a change in monetary policy.

Interest rate swap

The exchange of different types of interest bearing loan instruments, such as fixed for floating rate instruments.

Investment income

Income recorded in the balance of payments of income from foreign investments. See notes to Annex Table 48 .

Involuntary part-time work

This comprises three groups: i) individuals who usually work full-time but who are working part-time because of economic slack; ii) individuals who usually work part-time but are working fewer hours in their part-time jobs because of economic slack; and  iii) those working part-time because full-time work could not be found.


J-curve effect

Expression used to describe the initial deterioration and subsequent improvement of the trade balance following a depreciation of the exchange rate.


Knock-on effects

Effects on other variables/sectors derived from changes in activity in one variable/sector.


Labour force participation rate

The labour force divided by the total working-age population. See note to Annex Table 20 .

Labour force

20 See notes to Annex TableS 15  and 20 .

Lender of last resort

A lender, typically a central bank, which provides financial institutions with funds when they cannot borrow from the market. The availability of such lending is intended to prevent systemic problems due to liquidity shortage in individual institutions.


The use of borrowed funds to increase profitability and buying power. In accounting and finance, it is the amount of long term debt relative to equity. The higher the ratio the greater the leverage.


Liquidity is a characteristic of highly active markets, where large orders can be executed with ease and a negligible impact on prices.


M0, M1, M2, M3...

See the definition of monetary aggregates and notes to Annex Table 61 .

Medium-term projections or scenarios

Looking out five to six years, and published as part of the OECD's projection exercise. These scenarios basically indicate the requirements necessary to bring economies back to overall balance over the medium term-- in terms of closing the output and employment gaps. Moreover, they typically act as baseline scenarios for macroeconomic simulations of the effects of various alternative assumptions on economic policy or other forces affecting the projections.


Mercado Común del Sur. A free trade agreement between Argentina, Brazil, Paraguay and Uruguay.

Monetary aggregates

Measures of the stock of money in circulation outside the banking system. Because of the lack of clarity concerning the concept of money there are various statistical definitions of the money stock. As a general rule, narrow definitions include only the currency in circulation plus sight deposits held by domestic non-banks, while broad definitions additionally include time deposits as well as savings deposits at short notice held by domestic non-banks. Not all countries publish the same types of aggregates, and, even when aggregates have the same name (e.g. M1, M3, etc.) their asset composition often differs significantly. In the euro area, monetary aggregates definitions are based on harmonised definitions of the issuing and holding sectors and the financial sectors' liabilities. When the monetary policy strategy includes elements of monetary aggregate targeting, the choice of the definition of the targeted aggregate is guided mainly by two considerations. The aggregate should be sufficiently sensitive to interest rate changes for the central bank to be able to control it and display a stable relationship over time to the movement of the overall price level.

Monetary conditions

Assuming that both interest rates and the exchange rate are relevant indicators for the stance of monetary policy, monetary conditions can be captured by an index combining those indicators according to their relative importance for final demand. A monetary conditions index (MCI) was first introduced by the Bank of Canada. It is commonly calculated as weighted average of a short-term interest rate and an effective (i.e. trade-weighted) exchange rate, were both components are expressed as deviations from their values in a base year (the exchange rate deviation in logarithmic terms, with a positive deviation expressing a depreciation of the national currency). Thus upward movements of an MCI reflect a relatively thighter, and downward movements a relatively easier monetary stance. Many versions of the MCI use real instead of nominal interest and exchange rates. Weights are usually derived from estimated long-run interest and exchange rate elasticities, or simply by applying a weight of one to the interest rate, and a measure of trade openness (e.g. exports-to-GDP ratio) to the exchange rate. MCI measures have also been extended to include yield spreads and/or share prices ("Financial Conditions Index").

Money market

A market where debt securities, issued with maturities of one year or less, are traded.

Money supply

The total stock of money in a country (or a group of countries in a monetary union, such as the Euro area). See monetary aggregates.

Moral hazard

Describes behavior when agents do not bear the full cost of their actions and are thus more likely to take such actions.

Most favoured nation (MFN) principle

A principle of non discrimination embodied in Article 1 of the General Agreement on Tariffs and Trade (GATT), whereby any concession or privilege granted by one contracting party to GATT to a product of another contracting party will be unconditionally granted to the like product of all other contracting parties. In practice, MFN treatment is no longer limited to GATT contracting parties but applicable to other trading partners within the World Trade Organization (WTO).

Moyenne pondérée par la production des taux de droit de douane

Concept analogue à l'estimation du soutien aux producteurs. Indicateur de la valeur des transferts des consommateurs nationaux vers les producteurs nationaux. Cet indicateur ne rend pas compte des coûts d’efficience et donc de la perte de bien-être économique imputable à de telles mesures.

Mutual fund

A regulated investment company that pools money and invests in various assets.



North American Free Trade Agreement between United States, Canada and Mexico.


Non-accelerating inflation rate of unemployment. See structural unemployment  below.


Non-accelerating wage rate of unemployment, see structural unemployment  below.

National accounts

A coherent, consistent and integrated set of macroeconomic accounts, balance sheets and tables based on a set of internationally agreed concepts, definitions, classifications and accounting rules, the rationale behind national accounts is summarised in the following three paragraphs, which have been reproduced from the Introduction to SNA93. See also technical note by the OECD Statistics Directorate on the OECD web site. For a description of the data used in individual countries see note to Annex Table 2 . National accounts provide a comprehensive accounting framework within which economic data can be compiled and presented in a format that is designed for purposes of economic analysis, decision-taking and policy-making. The accounts themselves present in a condensed way a great mass of detailed information, organized according to economic principles and perceptions, about the working of an economy. They provide a comprehensive and detailed record of the complex economic activities taking place within an economy and of the interaction between the different economic agents, and groups of agents, that takes place on markets or elsewhere. In practice the accounts are compiled for a succession of time periods, thus providing a continuing flow of information that is indispensable for the monitoring, analysis and evaluation of the performance of an economy over time. The accounts provides information not only about economic activities, but also about the levels of an economy's productive assets and the wealth of its inhabitants at particular points of time. Finally, they also include an external account that displays the links between an economy and the rest of the world. The accounts may be implemented at different levels of aggregation: at the level of individual economic agents, or institutional units; for groups of such units, or institutional sectors; or at the level of the total economy. In order to understand the workings of the economy, it is essential to be able to observe and analyse the economic interactions taking place between the different sectors of the economy. Certain key aggregate statistics, such as gross domestic product (GDP), that are widely used as indicators of economic activity at the level of the total economy, are defined within the System, but the calculation of such aggregates has long ceased to be the primary purpose for compiling the accounts.  For an explanation of how GDP is constructed see note to Annex Table 2 . The System is built around a sequence of interconnected flow accounts linked to different types of economic activity taking place within a given period of time, together with balance sheets that record the values of the stocks of assets and liabilities held by institutional units or sectors at the beginning and end of the period. Each flow account relates to a particular kind of activity such as production, or the generation, distribution, redistribution or use of income. Each account is balanced by introducing a balancing item defined residually as the difference between the total resources and uses recorded on the two sides of the account. The balancing item from one account is carried forward as the first item in the following account, thereby making the sequence of accounts an articulated whole. The balancing items typically encapsulate the net result of the activities covered by the accounts in question and are therefore economic constructs of considerable interest and analytical significance - for example, value added, disposable income and saving. There is also a strong link between the flow accounts and the balance sheets, as all the changes occurring over time that affect the assets or liabilities held by institutional units or sectors are systematically recorded in one or another of the flow accounts. The closing balance sheet is fully determined by the opening balance sheet and the transactions or other flows recorded in the sequence of accounts.

Natural rate of unemployment

See structural unemployment  below.

Net lending

The excess of net acquisitions of financial assets by transactors over their net incurrence of liabilities.

Non-factor services

Non-factor services traded internationally, see notes to Annex Table 48 .

Non-tariff barriers

All barriers to trade that are not tariffs. Examples of these include countervailing and anti-dumping duties, "voluntary" export restraints, subsidies which sustain in operation loss making enterprises, technical barriers to trade, and obstacles to the establishment and provision of services. Moreover, the term is often used to include certain domestic measures, such as restraints on distribution and non-competitive practices that can also distort trade in the same way as border measures do. Some of these instruments, in particular technical regulations, minimum standards and certification systems regarding health and consumer safety do not ipso facto constitute barriers to trade, as they are generally employed to meet legitimate policy goals. However, there is a perception that, in some circumstances these sorts of policy instruments are being misused.


Oil prices

Unless otherwise noted, oil prices refer to the price of Brent crude as quoted on the London Petroleum Exchange.

Open market operation

The sale or purchase of mostly government securities, in a market open to private investors, by a central bank. Sales in the open market are an integral part of monetary policy, allowing the central bank to manage the volume of money and credit in the economy. For instance, if the money supply rises due to an unanticipated in-flow of foreign currency, the central bank may act to counter the rise in foreign exchange reserves by selling government securities; an action referred to as (monetary) sterilisation.

Operating surplus

Gross output at producers' values less the sum of intermediate consumption, compensation of employees, consumption of fixed capital and indirect taxes reduced by subsidies.


A contract (often referred to as "call/put"option) for the right to buy/sell a given amount of a specific asset at a fixed price on the expiry of the contract. Moreover, a so-called American option allows for the execution of a buy/sell prior to the expiry date of the option, while a buy/sell of a European option is limited to the date of expiry.

Output gap

The difference between actual and potential GDP as a per cent of potential GDP, see also notes to Annex Table 10.


Potential GDP

Defined in the Economic Outlook as the level of output that an economy can produce at a constant inflation rate. Although an economy can temporarily produce more than its potential level of output, that comes at the cost of rising inflation. Potential output depends on the capital stock, the potential labour force (which depends on demographic factors and on participation rates), the NAIRU, and the level of labour efficiency. See Richardson et. al.

Price earnings ratio

The price of a company's stock divided by its previous year's earnings.

Primary market

A market where new issues (initial public offerings) of stocks and bonds are sold, and where the proceeds go to the issuer.

Producer support estimates - PSE

An indicator of the annual monetary value of gross transfers from consumers and taxpayers to support agricultural producers, measured at farm gate level, arising from policy measures, regardless of their nature, objectives or impacts on farm production or income. The PSE measures support arising from policies targeted to agriculture relative to a situation without such policies, i.e. when producers are subject only to general policies (including economic, social, environmental and tax policies) of the country. The PSE is a gross notion implying that any costs associated with those policies and incurred by individual producers are not deducted. It is also a nominal assistance notion meaning that increased costs associated with import duties on inputs are not deducted. But it is an indicator net of producer contributions to help finance the policy measure (e.g. producer levies) providing a given transfer to producers. The PSE includes implicit and explicit payments. The percentage PSE is the ratio of the PSE to the value of total gross farm receipts, measured by the value of total production (at farm gate prices), plus budgetary support.

Production weighted tariff rate

In concept similar to producer support estimates. A measure of the value of transfers from domestic consumers to domestic producers. The measure does not capture the efficiency costs, and thus the loss in economic welfare attributable to such measures.

Property income

Actual and imputed transfers of income accruing from the ownership of financial assets, agricultural and other land, patents, copyrights, concessions and similar intangible assets.

Public corporations

Corporations wholly, or mainly, owned and/or controlled by the public authorities. All public financial institutions are treated as corporations.

Public enterprises

Government enterprises and public corporations. In either case organisations which are entirely, or mainly, owned and/or controlled by the public authorities consisting of establishments which by virtue of their kind of activities, technology and mode of operation are classed as industries.

Public sector

General government sector plus all public corporations, including the central bank.

Purchasing power parities - PPPs

International comparisons of GDP depend on two conditions being met. The first is that the basis of calculating GDP is consistent for the countries under comparison. The second is that the unit in which GDP is expressed, the numeraire, is comparable. The simplest way of comparing the GDP of two different countries is to convert each amount (or, even better, the amount per capita) to a common currency using official exchange rates. However, this is widely recognised as being inadequate because market exchange rates do not adequately reflect the comparative purchasing power of local currencies in their own markets. The concept of the purchasing power parity (PPP) was developed to provide an alternative conversion factor for GDP, so that internationally comparable price and volume comparisons of GDP could be established. PPPs are the rates of currency conversion which equalise the purchasing power of different currencies. This means that a given sum of money, when converted into different currencies at the PPP rates, will buy the same basket of goods and services in all countries. In other words, PPPs are the rates of currency conversion which eliminate the differences in price levels between countries. Thus, when expenditures on GDP for different countries are converted into a common currency by means of PPPs, they are expressed, in effect, at the same set of international prices so that comparisons between countries reflect only differences in the volume of goods and services purchased. Expenditures converted to a common currency using exchange rates, on the other hand, reflect not only differences in the volumes purchased in the different countries, but also the differences in price levels between the countries. Exchange rates do not reflect the relative purchasing powers of different currencies and are not, therefore, the appropriate currency conversion rates with which to make international comparisons of volume. Expenditures on GDP converted at exchange rates remain essentially nominal measures; the same expenditures converted using PPPs are real measures. The PPPs produced by the OECD do not refer solely to domestically-produced tradable goods and services valued at export prices. Instead, they have been calculated specifically for statistical purposes in order to enable international price and volume comparisons to be made for expenditure on GDP and its components. As such, they refer to the entire range of final goods and services which make up GDP as a whole including many items, such as construction and government services, which are not traded. Moreover, they are valued at domestic market prices and are calculated using expenditure weights that primarily reflect domestic demand. Both real and nominal expenditures are presented in OECD publications. The real values are expressed at international prices in US dollars; the nominal values are expressed at national prices in both US dollars and national currency (the choice of the US dollar as the common unit of currency is purely a matter of convention which has no effect on the relative positions of countries.)



Abbreviation for quarter.

Quarterly growth rate

Growth of a variable over previous quarter, at an annual rate. The calculation and presentation of growth rate information, particularly that relating to quarterly series, is sometimes a source of confusion and the following paragraphs aim at clarifying the measurement principles involved. Annual growth rates are commonly defined as the percentage change in a variable between two consecutive years. Similarly, quarterly growth rates can be calculated as the percentage changes between two consecutive quarters. It is often convenient, however, to convert such measures of quarterly growth into a form which is more readily comparable with annual growth figures, i.e. to express them at annual rates. Mathematically, this is done by raising to the power of four the quarterly growth factor (which is obtained by dividing the current value of a variable by its value in the preceding quarter), subtracting unity and multiplying by 100. In effect, the quarterly growth rate is compounded over four quarters to provide the annual rate of growth which would result from the continuation of the quarterly rate of growth over a one-year period. In terms of simple algebra, if a variable has a value of Xt in one quarter and Xt+1 in the next, the formula for the quarterly rate of growth for period t+1, expressed at an annual rate, is given by: g (t + 1) = [(X(t + 1) /X(t))4 - 1.0]*100 For example, based on quarterly GDP numbers for country X you can calculate the following growth rates.

GDP Actual rate Annual Rate Year-on-year
Volume Per cent increase over previous period
2001 Q4 100 na na na
2002 Q1 101.2 1.20 4.89 na
2002 Q2 103.1 1.88 7.72 na
2002 Q3  104.5 1.36 5.54 na
2002 Q4 105.1 0.57 2.32 5.10
2003 Q1 105.1 0.00 0.00 3.85
2003 Q2 104.6 -0.48 -1.89 1.45
2003 Q3 103.1 -1.43 -5.61 -1.34
2003 Q4 105.1 1.94 7.99 0.00
The actual growh rate from the fourth quarter 2001 to the first quarter 2002 is [(101.2/100)-1]*100 or 1.2 per cent, but at an annual rate it is [(101.2/100)4-1]*100 or 4.89 per cent. For the year 2003 as a whole GDP growth is 0.97 per cent. Such a numerical example helps illustrate the usefulness of quarterly growth rates in highlighting movements in an economic variable during the course of a year. It also demonstrates that annual growth rates for a specific year do not usually correspond to the average of the quarterly growth rates during that year. In the above example, the annual rate of growth for 2003, at 0.97 per cent, is higher than the average of the four quarterly rates of growth experienced during 2003, at 0.01 per cent. This is because year-on-year rates of growth are influenced by the levels of a variable in the four quarters of the preceding year, whereas the average of the corresponding four quarterly rates are influenced only by the level achieved in the fourth quarter of the preceding year. This feature is known as "carry over" effect.
The OECD Secretariat has also begun to present growth rates between the final quarters of successive years, commonly referred to as the growth rate during the year in question. Also, growth rates may be measured in relation to the corresponding month, quarter or semester of the previous year and are commonly used and referred to as "year-on-year" growth rates.


Rediscount credit

The credit which a central bank grants financial institutions against the purchase of bills of exchange.

Repurchase (repo) rate

The interest rate paid at the time of the repurchase of the securities in a repurchase agreement.

Repurchase agreement (or repo)

The sale of a security on the condition that the seller agrees to repurchase it at a future date at a fixed price. Securities are sold to the investor and at the same time an agreement is established to repurchase them at some point in the near future at the same price, but with a provision for interest to be paid to the investor at the end of the transaction, the repo rate.

Reserve requirements

The minimum reserves required for depository institutions. They are set by the central bank within limits specified by laws for depository institutions. A change in the minimum reserve ratio affects the amount of its deposit base a financial institution can lend out. Reserve requirements are an instrument of monetary policy.

Risk-free interest rate

Return on a security whose pay-off is certain.



System of National Accounts. See also National accounts  below, Technical note on national accounts " and The 1993 System of National Accounts .

Seasonal adjustment

Series are adjusted for seasonal variations and in some cases for calendar working days variations. When available, the seasonally adjusted data are taken directly from national statistical sources; otherwise, the method used for de-seasonalisation is the standard X-12 which was developed by the US Bureau of Census and incorporates general smoothing techniques and spectral analyses. (Further details may be found in Technical Paper No. 15 of the Bureau of the Census.) Where appropriate, series are also corrected for calendar variations (e.g. work-days per month) and constrained for annual coherency.

Secondary market

The purchase or sale of securities between the time of their initial issuance and before they mature. Many money market instruments are sold and bought several times by different investors before they mature.

Sectoral accounts

See appropriation accounts.

Securities and Exchange Commission

A US federal agency that regulates and supervises the selling of securities to prevent fraud and unfair practices and to maintain fair and orderly markets.

Social security

All social security funds at all levels of government. Social security funds are defined as social insurance schemes covering the community as a whole. These schemes may be either funded or unfunded. Those schemes established by governmental units to cover their own employees only are not counted as social security schemes in the general government sector. For example, the financial assets of pension funds for governmental employees are not included as financial assets of the general government sector, but rather belong in the insurance sector.

Spot price

The selling price of a commodity (oil, soy beans, currency, etc.) for immediate rather than forward delivery.


The difference in yield between two financial instruments, e.g. in a swap of different securities. Swaps are agreements between at least two counter-parties to exchange cash flows in the future according to a pre-specified formula. They can therefore be regarded as portfolios of forward contracts. The most common one is an agreement on the exchange of a fixed rate for a floating rate contract.

Stability and Growth Pact

The Pact is the framework, adopted in 1997, for the co-ordination of fiscal policy across EU States. It stipulates that Member States adhere to the medium-term objective of budgetary positions "close to balance or in surplus". This is judged to be necessary to allow automatic stabilisers to work during a normal downturn without taking the budget deficit above the 3 per cent of GDP limit. A general government deficit exceeding this threshold can lead to pecuniary penalties unless the European Council judges it to be temporary and there are special circumstances. Every year, each Member State draws up a stability (for the euro area Members) or convergence (for the others) programme setting out the key elements of fiscal policy over the next few years. The programme is submitted to the Commission and, based on the latter's recommendations, adopted by the European Council with a published opinion.

Standardised unemployment rate

 Unemployment measured as far as possible across countries according to ILO definitions of unemployment and labour force. See notes to Annex Table 22 .

Structural unemployment

The rate of unemployment consistent with constant wage inflation (NAWRU), or constant price inflation (NAIRU), given current economic conditions. For a discussion of this concept see OECD Jobs Study, Annex B (1996).


All grants on current account made by government to private industries and public corporations; and grants made by the public authorities to government enterprises in compensation of operating losses when these losses are clearly the consequence of the policy of the government to maintain prices at a level below costs of production.


Supervision of an oversight body, such as a central bank or a separate surveillance body of the operation of the payments system and the prudential behaviour of financial institutions. Such activity also includes ensuring that adequate levels of competition exist in the financial sector.


Agreements between at least two counter-parties to exchange cash flows in the future according to a pre-specified formula. They can therefore be regarded as portfolios of forward contracts. The most common one is an agreement on the exchange of a fixed rate for a floating rate contract.



Abréviation pour trimestre.


Tax identification number

Target interest rate

A given level of an interest rate - e.g. overnight lending rate, repo rate, etc. - with which the central bank seeks to influence short term interest rates, as part of its monetary policy strategy.

Tariff spikes

A measure of the degree of tariff rate dispersion. It is typically defined as those tariff rates that exceed a certain threshold value usually taken to be three times the overall simple bound rate, or above 15 per cent.


A tax imposed on a good imported into a country. A tariff may be specific, when it is levied as a fixed sum per unit of the imported good, or ad valorem, when it is applied at a percentage rate with reference to the value of the import.


The replacement of quantitative restrictions on imports with their estimated tariff equivalent.

Tax to GDP ratio

See notes to Annex Table 26.

Technical barriers to trade

Technical regulations, minimum standards and certification systems for health, safety and environmental protection and to enhance the availability of information about products, which may result in the erection of technical barriers to trade (TBTs). TBTs are mainly caused by differential application of technical regulations, standards and certification systems between domestic and foreign suppliers, although the fact that such regulations, standards and certification systems differ across countries may in itself be a barrier to trade. In practice it is difficult to evaluate the extent to which standards are applied or enforced differentially.

Temporary employment

Work under a fixed-term contract, in contrast to permanent work where there is no end-date. Employment under temporary contracts often entails a different set of legal obligations on behalf of employers; in particular, certain aspects of employment protection legislation do not apply to temporary contracts.

Terms of trade

Ratio of export and import prices.

Time to maturity

Time to maturity is the length of time until the contract’s expiration date.

Tobin tax

Tobin tax is the header commonly given to the proposal for levying all foreign exchange transactions. James Tobin first laid out such a proposal in the wake of the breakdown of the Bretton-Woods system of exchange rates. Recent interpretations of the proposal, while described as a "Tobin tax" have been at variance with the original idea, a point made by Tobin himself.

Trade restrictiveness index - TRI

An indicator of welfare losses caused by commercial policy instruments. The TRI weights trade policy measures by their associated welfare losses to compile a single synthetic measure. Implementing this technique is demanding in terms of data requirements.

Transaction tax

Transaction tax is a tax levied on the transaction of securities.

Treasury bill

A short-term debt issued by a national government with a maximum maturity of one year. Treasury bills are sold at discount, such that the difference between purchase price and the value at maturity is the amount of interest.

Treasury bond

A bond issued by a national government. Treasury bonds normally carry a higher rating than local government or corporate bonds, thereby offering a lower yield.

Treasury note

An intermediate interest bearing obligation of a national government with a maturity ranging from one to five years.



See notes to Annex Tables 13, 14   and 22   and structural unemployment  above.

Unit labour costs

Wages and salaries including employer contributions to social security per unit of output.



Value-added tax.

Variable rate

An interest rate that may fluctuate over the life of the loan, unlike a fixed rate. A change in the variable rate will affect either the size of the re-payment or the length of the loan.

Vertical supply linkages

Refers to links between firms, or within a firm, up-and-down the production chain for a particular product. In recent times the production chain for a range of products and services has become more global.


Volatility is a measure of the risk or uncertainty faced by participants in financial markets. It can be measured either from the past variation of asset prices – c.f., historical volatility, ARCH/stochastic volatility models – or imputed from derivative pricing models – c.f. implied volatility.

Voluntary export restraints - VER

Arrangements between exporting and importing countries in which the exporting country agrees to limit the quantity of specific exports below a certain level in order to avoid imposition of mandatory restrictions by the importing country. The arrangement may be concluded either at the industry or government level.


Wealth effects

Effects on private spending arising from a change in wealth. Wealth effects are usually associated with changes in the value of equity, bonds and real estate.

World Trade Organisation - WTO

International organisation dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible. The system ' known as the multilateral trading system ' is centered around WTO agreements, negotiated and signed by a large majority of the world's trading nations, and ratified in their parliaments. These agreements are the legal ground-rules for international commerce. Essentially, they are contracts, guaranteeing member countries important trade rights. They also bind governments to keep their trade policies within agreed limits. The agreements were negotiated and signed by governments. But their purpose is to help producers of goods and services, exporters, and importers conduct their business.

World trade (growth of)

Calculated as the arithmetic mean of the growth of world import volumes and world export volumes.


Yield curve

A curve that traces yields on securities with varying maturities. The slope of the yield curve is an indication of the stance of monetary policy. Under normal conditions, interest rates for long term rates are likely to be higher than short-term rates, resulting in an upward sloping yield curve. An inverted yield curve occurs when short-term interest rates rise above long-term rates, usually due to the central bank raising short-term interest rates to prevent the economy from overheating.


The net present rate of return on an investment. For a bond the current yield is the coupon rate of interest divided by the purchase price. A yield is inversely related to the price of a bond, such that as the price of the bond goes up, its yield declines.