Definition – What does Tight Money mean?
Tight money is a slang term for an economic situation where credit has been constrained, making it very difficult for businesses and consumers to get loans. Tight money is usually the result of monetary policy decisions that limit or reduce the money supply. Tight money generally leads to an economic contraction.
ForexTerms explains Tight Money
Tight money is usually introduced as a reaction to a prolonged period of loose money – that is, loose monetary policy. In order to cool down an inflating or overheating economy, central banks are forced to reduce the amount of easy credit in the system. This is a delicate balancing act, as tightening too much can result in a credit crunch, which may in turn lead to recession or depression.
