Real interest rates and growth: Improving on some deflating experiences
AbstractTests of the McKinnon-Shaw hypothesis typically investigate the relationship between real interest rates and growth. Recent work has concluded that this relationship may be non-monotonic. This article investigates the role of real interest rate mismeasurement in explaining these non-monotonicities. When such mismeasurement is systematically related to growth, it will produced biased empirical results. After addressing these biases, the article demonstrates that financial liberalisation may offer substantial economic gains. In an 'average' country, raising real interest rates from -25 per cent to five per cent will increase real annual per capita GDP growth from zero to a relatively robust rate of two per cent.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Journal of Development Studies.
Volume (Year): 34 (1997)
Issue (Month): 1 ()
Contact details of provider:
Web page: http://www.tandfonline.com/FJDS20
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Maslov, Alexander, 2011. "Inflationary Handicap Of The Monetary Transmission Mechanism: Evidence From Russia," MPRA Paper 50036, University Library of Munich, Germany, revised 12 Apr 2012.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.