Archives: Terms

Definition of Credit Squeeze A credit squeeze occurs when there is a sudden reduction in the general availability of loans or a sudden tightening of the conditions required to obtain a loan from banks. This can happen regardless of the interest rates in the market. A credit squeeze may be […]

Definition of Credit Restriction Credit restriction, also known as credit rationing, refers to the conditions under which borrowers are denied or limited in their access to credit, despite being willing to pay the current interest rate. This phenomenon occurs when lenders impose certain conditions or standards that must be met […]

Definition of Credit Rationing Credit rationing occurs when financial institutions limit the availability of loans to certain customers, or issue smaller amounts than requested, even if the applicants are willing to pay higher interest rates. This concept applies to situations where the supply of credit does not meet demand, not […]

Definition of Credit Cycle The credit cycle refers to the expansion and contraction of access to credit over time. It encompasses periods of easy credit conditions where financing is readily available, leading to increased borrowing and investment, followed by periods of tight credit, where lending standards are stricter, resulting in […]

Definition of Credit Crunch A credit crunch refers to a sudden reduction in the general availability of loans or credit or a sudden tightening of the conditions required to obtain a loan from banks. It can occur due to various reasons, including heightened fears of risk among lenders, an economic […]

Definition of Credit Creation Credit creation refers to the process by which banks and financial institutions generate more money for lending than the actual deposits they receive. This capability stems from the fractional-reserve banking system, which allows banks to keep a fraction of their deposits in reserve and use the […]

Definition of Credit Control Credit control is a critical business practice that involves managing and controlling credit policies that govern a company’s extension of credit to its customers. It is a strategic tool used by firms to ensure they maintain sufficient cash flow, minimize bad debts and avoid overextending credit […]

Definition of Credit Credit refers to the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately, but promises either to repay or return those resources at a later date. In essence, it is the permission to use […]

Definition of Credible Threat A credible threat refers to a situation in economics, and strategic decision-making, where one party can convincingly threaten another party with negative consequences if certain conditions are not met. The credibility of the threat is rooted in the capability and willingness of the threatening party to […]

Definition of Credibility Credibility refers to the trustworthiness, reliability, and authority that an individual, institution, or piece of information holds. In the context of economics and finance, credibility plays a crucial role in influencing the behavior of market participants, shaping consumer confidence, and determining the effectiveness of policy measures. It […]