Dictionary Home »
Invest » crowding out
crowding out investment & finance definition
The
effect that occurs when governments borrow heavily to fund budget deficits.
Governments that are heavy debt issuers may supply all of the debt that the
market needs, which makes it that much more difficult for other less
highly-rated borrowers, such as corporations, to issue debt. If the supply of
debt increases, the prices of bonds and notes fall. Because interest rates move
inversely to the price of bonds or notes, the cost of borrowing rises.
See crowding out in Wall Street Words
Learn more about crowding out