IMF Working Papers

High Real Interest Rates Under Financial Liberalization: Is there a Problem?

By Vicente Galbis

January 1, 1993

Preview Citation

Format: Chicago

Vicente Galbis. High Real Interest Rates Under Financial Liberalization: Is there a Problem?, (USA: International Monetary Fund, 1993) accessed November 23, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Concerns were raised beginning in the 1980s about the possible detrimental effects of high positive real interest rates under financial liberalization. Using a sample of 28 countries that underwent financial liberalization since the 1970s, the paper examines the evidence about the emergence of high real interest rates and discusses the possible causes and likely effects. Some remedies--preferably preventive--are considered including macroeconormic stabilization, fiscal consolidation, improvements in prudential regulation and supervision of the financial sector, and introduction of an efficient management of indirect monetary policy instruments.

Subject: Banking, Deposit rates, Depreciation, Exchange rates, Financial services, Foreign exchange, Inflation, National accounts, Prices, Real interest rates

Keywords: Deposit rates, Depreciation, Exchange rate depreciation, Exchange rates, Gross investment, Inflation, Inflation rate, Interest rate factor, Interest rate liberalization, Liberalization of interest rates, Minimum lending rate, Rate of return, Real deposit rate, Real interest rates, Real rate of interest, Uncovered interest rate diff., West Africa, WP

Publication Details

  • Pages:

    94

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1993/007

  • Stock No:

    WPIEA0071993

  • ISBN:

    9781451842364

  • ISSN:

    1018-5941

You May Also Be Interested In...

Sierra Leone: Selected Issues

November 22, 2024

Bilateral Trade in Services and Exchange Rates: Evidence of Dominant Currency Pricing

November 22, 2024

The Role of Corporate Cash Holdings in the Transmission of Monetary Policy Tightening

November 22, 2024

Kiribati: Agricultural Subsidies for Copra: Improving Efficiency and Equity and Balancing Trade-offs

November 21, 2024