Definition: The Hard Landing is the economic condition, wherein the economy moves sharply from the high growth period to the low growth due to the change in the monetary policy. In other words, the sudden shift in the economy from the period of expansion to recession is called hard landing.
Often government intervenes to curb the expansion period that may lead to the inflation in the economy and hence amends the monetary or fiscal policy to control the inflation. The hard landing demands the Central Bank to stiffen the monetary policy, such that the sudden increase in the interest rates would pressurize the demand for the new loans to decline subsequently.
The pace of the economy can be controlled by adopting either of the strategies: tightening the credit policy, adjusting the short-term interest rates, conducting open market operations, re-valuating the currency, etc.
The consequences of hard landing may be undesirable to both the companies and the general public. With the increase in the interest rates, the company’s growth may slow down, and even the customer loses confidence in the market. Due to these reasons the economy contracts in a short period of time and reaches to the recession state after the rapid growth period.