Archives: Terms

Definition of Bayesian Econometrics Bayesian econometrics is an approach to economic analysis that applies the principles of Bayesian probability to econometric models. This methodology considers both the likelihood of the data given the parameters (the likelihood) and the prior beliefs about the parameters (the prior) to form a revised belief […]

Definition of Bayes’ Theorem Bayes’ theorem, named after Reverend Thomas Bayes, is a mathematical formula used to update the probabilities for hypotheses as more evidence or information becomes available. It is the cornerstone of the field of Bayesian statistics and provides a way to revise existing predictions or theories in […]

Definition of Baumol’s Cost Disease (Baumol’s Law) Baumol’s Cost Disease, or Baumol’s law, is an economic theory developed by William J. Baumol and William G. Bowen in the 1960s. It explains a phenomenon in the labor market where wages increase in jobs that have not experienced corresponding increases in labor […]

Definition of Batch Production Batch production is a manufacturing technique where products are produced in groups or “batches” rather than in a continuous stream. This method is characterized by the production of a set of identical products, which goes through the whole production process before starting a new batch. Batch […]

Definition of Basis Point A basis point is a common unit of measure for interest rates and other financial percentages, representing one hundredth of a percentage point (0.01%). It is commonly used in the finance industry to denote very small changes in financial instruments such as bonds, loans, and savings […]

Definition of Basel Agreement The Basel Agreement refers to a series of international regulatory frameworks developed by the Basel Committee on Banking Supervision (BCBS) intended to ensure that financial institutions maintain adequate capital to cover risks. These regulations, known as Basel I, II, and III, were developed in response to […]

Definition of a Base-Weighted Index A base-weighted index is a type of stock market index where the overall value of the index is derived by comparing the current market value of all included stocks to their total market value during a specific base year. The index is “weighted” because it […]

Definition of Base Rate The base rate, often referred to as the base interest rate, is the interest rate set by a central bank. This rate is the minimum rate at which commercial banks are allowed to borrow money from the central bank or lend to each other. It serves […]

Definition of Base Period A base period is a specific point or span of time used as a reference point to measure changes in economic or financial variables. This term is predominantly used in the calculation of indexes, such as consumer price indexes (CPI), and in other statistical analyses where […]

Definition of Base Money Base money, also known as the monetary base, high-powered money, or M0, refers to the portion of a country’s money supply that is controlled directly by the central bank. This includes the currency (coins and banknotes) in circulation outside the central bank and the commercial banks’ […]