The title of the book perfectly encapsulates the essence of how little Oskar reacts to the world around him. For here is a boy whose overflowing heart feels everything too loudly and too closely, and he has a tendency to hang onto every experience, every feeling that he encounters.
Oskar's connection with the world around him has been forged exclusively by his intense emotions. But because Oskar is too young and too naive to deal with those emotions adequately, they threaten to overwhelm him. They are loud in the sense that, just like a noise, they cannot be ignored. But they are also close in that they mean so much to him, they have profound significance and are buried deep within his heart.
Under the circumstances, Oskar tries to deal with his emotions by suppressing them. He does this in relation to the death of his father. In order to move on with his life after this terrible tragedy, Oskar sets himself a rule whereby if someone does something first he'll copy them. As his mother shows no outward sorrow over the death of Oskar's father, Oskar decides to follow suit.
Yet at the same time Oskar so desperately wants to shout out loud—extremely loud, no less—what's on his mind and in his heart, and he expresses his repressed feelings through fantasies in which he unleashes his emotions.