tight money

(redirected from Tight Monetary Policies)
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Tight money

When a restricted money supply makes credit difficult to secure. The antithesis of tight money is easy money.

Tight Money

A situation in which it is difficult to receive credit because of the monetary policy of the central bank. Tight money occurs when the central bank has enacted relatively high target interest rates. While this usually happens when the central bank is seeking to control or is concerned about inflation, tight money can negatively impact security prices and make it hard to receive a loan for a house or business.

tight money

A condition of the money supply in which credit is restricted and interest rates, consequently, are relatively high. Tight money generally has a negative effect on security prices, at least in the short run. Compare easy money.

tight money

or

dear money

a government policy whereby the CENTRAL BANK is authorized to sell government BONDS on the open market to facilitate a decrease in t he MONEY SUPPLY (see MONETARY POLICY).

The decrease in money supply serves to increase INTEREST RATES, which discourages INVESTMENT because previously profitable investments become unprofitable owing to the increased cost of borrowing (see MARGINAL EFFICIENCY OF CAPITAL

INVESTMENT).

Tight money policy, through MONEY SUPPLY/SPENDING LINKAGES, reduces AGGREGATE DEMAND. Contrast CHEAP MONEY.

References in periodicals archive ?
Next, it is necessary to maintain economic growth at a sensible speed by adopting adequately tight monetary policies.
He said the positive indicators of Indonesia's economic rebound were due to a set of comprehensive policies, which included tight monetary policies aimed at stabilizing prices and exchange rates.
8% in the first quarter of the year, which is partly a reflection of the tight monetary policies adopted by the Banco de Mexico (central bank) in the past year.
The IMF argued that currency devaluations might have been less severe had tight monetary policies been pursued "earlier, more aggressively and more consistently" by the countries in crisis.