Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Leakage

What it is:

Leakage occurs when money leaves an economy. In the investor relations world, leakage also refers to the unauthorized or unanticipated dissemination of information.

How it works (Example):

Let's say interest rates in Country X suddenly surpass interest rates in Country Y. Money begins to leak out of Country X and into Country Y as investors seek higher returns for the same amount of risk.

Why it Matters:

Leakage can have many forms; interest rates are just one way for money to leak out of an economy. High taxes can have the same effect, as can excessive saving or higher interest in purchasing imported goods. In any case, the exit of money from an economy means the businesses in those economies must look for other forms of revenue. The shortage of capital can spur governments to stimulate the economy as a result.

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...