In the last decade, many of the more advanced developing countries in Latin America and Asia have deregulated and opened up their financial markets. What impact has this had on the efficiency of the financial sector? How can the existence of sustained interest differentials be explained?

Many developing countries are currently considering liberalisation of external capital flows. While the ultimate objective of financial opening is to raise efficiency and growth, the reform process must be carefully designed to achieve these results. A recent conference has discussed the policy...