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Encyclopedia > Hot money

Hot money is used in economics to refer to funds which flow into a country to take advantage of a favourable interest rate, and therefore obtain higher returns. They influence the balance of payments and strengthen the exchange rate of the recipient country while weakening the currency of the country losing the money. These funds are highly volatile and will be shifted to another foreign-exchange market when relative interest rates make the moe profitable. It is money held in currency markets by speculators.


See also

arbitrage


  Results from FactBites:
 
Hot money - Wikipedia, the free encyclopedia (325 words)
In the language of crime, hot money refers to stolen currency that can easily be traced back to the crime, such as marked bills or new currency with consecutive serial numbers.
Hot money is a major factor in capital flight and the ability of developing nations to finance their debt.
As large sums of money can move very quickly to take advantage of small fluctuations in interest rates and currency values, countries which have difficulty raising money through the sale of long-term bonds are particularly susceptible to short-term interest rate pressure, particularly during periods of rapid inflation.
Online NewsHour: Collision Course with Iraq? -- November 16, 1998 (1640 words)
Hot money can be pulled out quickly if a better deal comes along.
RICHARD FEINBERG: By hot money, they mean speculative money; money invested for the short-term.
People in both cases hope to place down their money and to win; and if they win they'll put down more money and they'll keep winning until maybe at some point the bubble bursts.
  More results at FactBites »

 

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