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.