The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Hot Money

  • Brendan Brown
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_800

Abstract

Hot money describes large-scale international movements of short-term capital under a fixed exchange rate system driven either by speculation on an imminent devaluation (or revaluation) or by interest rate differentials apparently greater than exchange risk. In the two decades prior to World War I, hot money flows were rare – so great was the level of confidence in the maintenance of the gold standard in the major countries. It was quite different in the interwar years. Major episodes of hot money flows included the flood of foreign funds into France in 1926–8 on speculation that the franc would be revalued. Then in the mid-1930s, there were huge outflows of hot money from the gold bloc currencies into London and New York.

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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Brendan Brown
    • 1
  1. 1.