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

Author/Editor:

Vicente Galbis

Publication Date:

January 1, 1993

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.

Series:

Working Paper No. 1993/007

Subject:

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

English

Publication Date:

January 1, 1993

ISBN/ISSN:

9781451842364/1018-5941

Stock No:

WPIEA0071993

Pages:

94

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