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An Analytical Approach to Interest Rate Determination in Developing Countries

Author

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  • MOHSIN S. KHAN

    (International Monetary Fund (IMF), Washington, D.C.)

Abstract

The role of interest rates in the development process has been studied exten· sively in recent years. Following upon the seminal work of McKinnon (1973), there have been a number of theoretical and empirical studies examining the relationship between financial development and economic growth, the effect of changes in real interest rates on savings and investment, and more generally, the pros and cons of a market-oriented financial system.1 Broadly speaking, there is now ample empirical evidence supporting the original claim by McKinnon [10] that there is a positive association between the degree of development of the financial sector, resulting primarily from a freer structure of interest rates, and the overall economic performance of developing countries.

Suggested Citation

  • Mohsin S. Khan, 1985. "An Analytical Approach to Interest Rate Determination in Developing Countries," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 24(3-4), pages 481-495.
  • Handle: RePEc:pid:journl:v:24:y:1985:i:3-4:p:481-495
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    Cited by:

    1. Jeffrey A. Frankel, 1997. "Sterilization of money inflows: Difficult (Calvo) or Easy (Reisen)?," Estudios de Economia, University of Chile, Department of Economics, vol. 24(2 Year 19), pages 263-285, December.
    2. Sebastian Edwards, 2000. "Capital Flows, Real Exchange Rates, and Capital Controls: Some Latin American Experiences," NBER Chapters,in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 197-246 National Bureau of Economic Research, Inc.
    3. Felmingham, Bruce & Leong, SuSan, 2005. "Parity conditions and the efficiency of the Australian 90- and 180-day forward markets," Review of Financial Economics, Elsevier, vol. 14(2), pages 127-145.
    4. Addison T. & Demery L., 1986. "Impact of liberalisation on growth and equity," ILO Working Papers 992500143402676, International Labour Organization.
    5. Chong, Terence Tai Leung & Liu, Wenqi, 2016. "The Roadmap of Interest Rate Liberalization in China," MPRA Paper 80564, University Library of Munich, Germany.
    6. Ramkishen S. Rajan & Reza Y. Siregar & Tony Cavoli, 2006. "Financial Integration in East Asia: How Far? How Much Further to Go?," Working Papers id:372, eSocialSciences.
    7. Jeffrey A. Frankel, 1993. "Is Japan Creating a Yen Bloc in East Asia and the Pacific?," NBER Chapters,in: Regionalism and Rivalry: Japan and the United States in Pacific Asia, pages 53-88 National Bureau of Economic Research, Inc.
    8. Wilairat TONGSIRI & Hiroyuki KOSAKA, "undated". "Asian Financial Liberalization and its Impact using Asian International Input-Output Model," EcoMod2008 23800143, EcoMod.
    9. Ying, Yung-Hsiang & Kuan, Chung-Ming & Tung, Chris Y. & Chang, Koyin, 2013. "“Capital mobility in East Asian Countries is not so high”: Examining the impact of sterilization on capital flows," China Economic Review, Elsevier, vol. 24(C), pages 55-64.
    10. repec:spr:fininn:v:3:y:2017:i:1:d:10.1186_s40854-017-0075-8 is not listed on IDEAS
    11. Hanif, M Nadim & Hyder, Zulfiqar & Lodhi, M Amin Khan & Khan, Mahmood ul Hassan & Batool, Irem, 2008. "A small-size macroeconometric model for Pakistan economy," MPRA Paper 22930, University Library of Munich, Germany, revised 2010.
    12. repec:spr:jqecon:v:16:y:2018:i:1:d:10.1007_s40953-017-0079-2 is not listed on IDEAS
    13. Fred IKLAGA, "undated". "Are Gap Models Policy Consistent? A Quarterly Prediction Model for Monetary Policy In Nigeria," EcoMod2009 21500042, EcoMod.
    14. Schweickert, Rainer, 1991. "Efficient real exchange rate adjustment in developing countries: alternative devaluation strategies, economic structure, and sequencing of reforms," Kiel Working Papers 473, Kiel Institute for the World Economy (IfW).
    15. de Brouwer,Gordon, 1999. "Financial Integration in East Asia," Cambridge Books, Cambridge University Press, number 9780521651486, April.
    16. Valente, Giorgio, 2009. "International interest rates and US monetary policy announcements: Evidence from Hong Kong and Singapore," Journal of International Money and Finance, Elsevier, vol. 28(6), pages 920-940, October.
    17. Maloney, William F., 1997. "Testing capital account liberalization without forward rates Another look at Chile 1979-1982," Journal of Development Economics, Elsevier, vol. 52(1), pages 139-168, February.
    18. Sung Hee Jwa, 1994. "Capital Mobility in Korea since the Early 1980s: Comparison with Japan and Taiwan," NBER Chapters,in: Macroeconomic Linkage: Savings, Exchange Rates, and Capital Flows, NBER-EASE Volume 3, pages 123-166 National Bureau of Economic Research, Inc.
    19. Ozatay, Fatih, 1997. "Sustainability of fiscal deficits, monetary policy, and inflation stabilization: The case of Turkey," Journal of Policy Modeling, Elsevier, vol. 19(6), pages 661-681, December.
    20. Willett, Thomas D. & Keil, Manfred W. & Ahn, Young Seok, 2002. "Capital mobility for developing countries may not be so high," Journal of Development Economics, Elsevier, vol. 68(2), pages 421-434, August.
    21. Linda M. Koenig, 1996. "Capital Inflows and Policy Responses in the AsEAN Region," IMF Working Papers 96/25, International Monetary Fund.

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