콘텐츠 바로가기
로그인
컨텐츠

Category Open

Resources

tutorial

Collection of research papers and materials on development issues

home

Resources
Economy General
Economy Financial Policy

Print

Financial liberalization and economic development : A reassessment of interest - rate policies in Asia and Latin America

Related Document
Frame of Image
  • Financial liberalization and economic development
  • McKinnon, Ronald I.
  • United States Agency for International Development


link
Title Financial liberalization and economic development
Similar Titles
Sub Title

A reassessment of interest - rate policies in Asia and Latin America

Material Type Reports
Author(English)

McKinnon, Ronald I.

Publisher

[Washington, D.C.]:United States Agency for International Development

Date 1988-09
Series Title; No Other USAID Supported Study/Document; Occasional paper / 6
Pages 50
Subject Country Chile(Americas)
Japan(Asia and Pacific)
South Korea(Asia and Pacific)
Taiwan(Asia and Pacific)
Language English
File Type Link
Subject Economy < General
Economy < Financial Policy
Holding United States Agency for International Development

Abstract

Well into the 1970's, credit subsidies, at below market interest rates, were widely promoted as a means of stimulating socially desirable investments. In the last decade, however, there has been a widespread movement to liberalize and deregulate financial markets while stabilizing domestic price levels. This study examines the success of the liberalization approach in select Asian and Latin American countries. Part I reviews the evidence that financial liberalization and positive real rates of interest are often associated with higher economic growth in developing countries. The cases of postwar Japan and Taiwan are cited as examples of success. However, the report also notes that several attempts at financial liberalization have ended in failure. Focusing on Chile's stabilization effort from 1978 to 1982, the report illustrates how premature decontrol can lead to expanded foreign debt and the need for government reintervention to prop up failing domestic banks and industrial enterprises. In Part II, the paper draws upon the Chilean experience to develop guidelines for effectively moving from high and volatile inflation to price-level stability. Key differences between that effort and the more successful, but less demanding, Korean stabilization of 1979-83 are highlighted.