Definition of Hot money:
Capital which is frequently transferred between financial institutions in an attempt to maximize interest or capital gain.
General: Alternative term for discretionary income.
International finance: Extremely volatile short-term capital that moves on a short notice to any country providing better returns. Powerful speculators can quickly pump massive sums into a high-yield economy, giving it an artificial aura of success and propriety. But, on a mere suspicion of a downturn or other negative factor, they can (and do) withdraw it almost overnight causing a near collapse of the countrys financial structure.
Hot money not only relates to currencies of different countries, but it may also refer to capital invested in competing businesses. Banks seek to bring in hot money by offering short-term certificates of deposit (CDs) with higher-than-average interest rates. If the bank lowers its interest rates, or if a rival financial institution offers higher rates, investors are apt to move hot money funds to the bank offering the better deal.
Hot money signifies currency that quickly and regularly moves between financial markets, that ensures investors lock in the highest available short-term interest rates. Hot money continuously shifts from countries with low-interest rates to those with higher rates. These financial transfers affect the exchange rate and potentially impact a country's balance of payments. Hot money can also refer to stolen money that has been especially marked, so that it may be traced and identified.
Local finance: Money obtained through illegal means such as drug trafficking. Also called dirty money.
How to use Hot money in a sentence?
- The Chinese economy is an example of a hot money market that turned cold following investor flight.
- Hot money is capital that investors regularly move between economies and financial markets to profit from highest short-term interest rates.
- Hot money left US banks as interest rates fell.
- Banks bring hot money into an economy by providing short-term certificates of deposit with higher-than-average rates.
Meaning of Hot money & Hot money Definition