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Interest Rate Policies, Stabilization, and Bank Supervision in Developing Countries: Strategies for Financial Reforms

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  • International Monetary Fund

Abstract

This paper identifies macroeconomic stability, effective bank supervision, and an appropriate sequencing of stabilization, banking regulations, and interest rate policies as common characteristics of the relatively successful experiments in financial sector liberalization. Recent theoretical developments help to explain why interest rates in free markets for bank credit may fall short of market-clearing levels, or may rise to risky levels with adverse consequences for financial institutions and the economy at large. To prevent such outcomes, macro-economic stabilization and improved bank supervision should generally precede complete removal of control on bank interest rates.

Suggested Citation

  • International Monetary Fund, 1990. "Interest Rate Policies, Stabilization, and Bank Supervision in Developing Countries: Strategies for Financial Reforms," IMF Working Papers 1990/008, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1990/008
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    Citations

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    Cited by:

    1. Philip Arestis, 2003. "Financial Sector Reforms in Developing Countries with Special Reference to Egypt," Economics Working Paper Archive wp_383, Levy Economics Institute.
    2. James B. Ang, 2008. "Are Financial Sector Policies Effective In Deepening The Malaysian Financial System?," Contemporary Economic Policy, Western Economic Association International, vol. 26(4), pages 623-635, October.
    3. Lahera, Eugenio, 1990. "The State and changing production patterns with social equity," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    4. Ang, James B., 2009. "Private Investment and Financial Sector Policies in India and Malaysia," World Development, Elsevier, vol. 37(7), pages 1261-1273, July.
    5. Ms. Elina Ribakova, 2005. "Liberalization, Prudential Supervision, and Capital Requirements: The Policy Trade-Offs," IMF Working Papers 2005/136, International Monetary Fund.
    6. Joseph Bisignano, 1996. "Varieties of monetary operating procedures: balancing monetary objectives with market efficiency," BIS Working Papers 35, Bank for International Settlements.
    7. James Ang, 2008. "Private Investment And Financial Sector Policies In Developing Countries," Monash Economics Working Papers 07/08, Monash University, Department of Economics.
    8. Ang, James B., 2008. "What are the mechanisms linking financial development and economic growth in Malaysia," Economic Modelling, Elsevier, vol. 25(1), pages 38-53, January.
    9. LG Deidda, 2001. "Financial Institutions' Expertise and Growth Effects of Financial Liberalisation," Working Paper CRENoS 200105, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    10. Philip Arestis & Machiko Nissanke & Howard Stein, 2005. "Finance and Development: Institutional and Policy Alternatives to Financial Liberalization Theory," Eastern Economic Journal, Eastern Economic Association, vol. 31(2), pages 245-263, Spring.

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