Hot money is money in bank balances, demand loans on securities or short term investments which the owners may move without notice from one country to another and thus out of one currency into another in search of greater security or better terms. Hot money moves promptly on loss of confidence in a currency due to fear of depreciation, legal devaluation, or a legal limitation or prohibition on future transfers out of the country. When security is not a factor, hot money moves to those countries paying the highest interest rates, or otherwise offering better terms, such as shorter notice for withdrawal or guarantees against confiscation.
NOTE: This is not the popular meaning that hot money is money that is suspected or tainted because it was obtained by questionable or illegal means.
- Percy L. Greaves, Jr. "Mises Made Easier ", 1974. Referenced 2014-07-16.