KEY TERMS

trade cost

no-arbitrage band

Balassa-Samuelson effect

equilibrium real exchange rate

carry trade

peso problem

forecast error

rational expectations hypothesis

efficient markets hypothesis

inefficient market

limits to arbitrage

excess return

Sharpe ratio

sovereign default

contingent claim

repayment threshold

Global Financial Crisis

Great Recession

global imbalances

savings glut

undervalued exchange rates

too-easy monetary policy

failure of regulation and supervision. p. 499

government failure

market failure