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A credit crunch (also known as a credit squeeze or credit crisis) is a reduction in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from the banks. A credit crunch generally involves a reduction in the availability of credit independent of a rise in official interest rates. In such situations, the relationship between credit availability and interest rates has implicitly changed, such that either credit becomes less available at any given official interest rate, or there ceases to be a clear relationship between interest rates and credit availability (i.e. credit rationing occurs). Many times, a credit crunch is accompanied by a flight to quality by lenders and investors, as they seek less risky investments (often at the expense of small to medium size enterprises).

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See also

• Austrian Business Cycle Theory
• Financial crisis
• Minsky moment

Bibliography

• George Cooper, The Origin of Financial Crises (2008: London, Harriman House) ISBN 1905641850
• Graham Turner, The Credit Crunch: Housing Bubbles, Globalisation and the Worldwide Economic Crisis (2008: London, Pluto Press), ISBN 9780745328102

References

1. Is There A Credit Crunch in East Asia? Wei Ding, Ilker Domac & Giovanni Ferri (World Bank)

• Credit
• Debt
• Economic problems
• Financial crises
• Terms and concepts of the 2000s United States housing bubble