What is a transfer?

All economic exchanges involve transfers. In fast food restaurants, for instance, you will exchange cash for a hamburger. This is a bilateral transfer. It is bilateral because most fast food chains do not give hamburgers for free, nor are you willing to give up hard-earned dollars without being able to bite into a burger. The large majority of economic transfers are bilateral. Nowadays, it is usually goods or services for money, be it dollars, guilders, pounds or yen, or barter trade. This book is not about such transfers.

This is a book about unilateral transfers. It involves money sent to alleviate some of the distress after earthquakes or famines, or money sent to help a friend or relative, etc. In these instances the donating party helps the recipient without getting anything in return, save perhaps the good feeling of helping someone. For that reason it is called unilateral, because you get nothing in exchange for your dollars. Of course, one might also be on the receiving side of a transfer, for example if the state helps you to pay for university, or if you “enjoy” unemployment benefits. It is easy, but admittedly rather boring, to come up with an endless list of examples of unilateral transfers.

We analyze the economic consequences of international unilateral transfers. Why did we not state this more explicitly in the title of our book? Force of habit. For many years prominent economists have discussed “the transfer problem” with reference to international unilateral transfers (Eichengreen 1992). The former is, of course, a more succinct term with a better ring to it than the latter.