Most developing countries intervene extensively in financial markets, setting ceilings on interest rates and spreads and allocating much (often between half and all) of formal credit to"priority"uses. This study reviews interest rate controls and other repressive financial policies on investment...

In the McKinnon and Shaw analysis, financial liberalization is defined to mean the establishment of higher interest rates that equate the demand for, and the supply of, savings. It expresses the views that higher interest rates will lead to increased savings and financial intermediation as well...

The author sets out a methodology for analyzing episodes of high real interest rates in emerging market economies. He reviews the literature on what determines spreads in deposit rates and loan rates. Then he links the causes of interest rate spreads by explicitly modeling the incentive effect...

The high commercial lending rates Nicaragua is currently experiencing, together with a perceived scarcity of credit, have often been blamed for the country's slow growth and have been considered a major failing of the adjustment program initiated in 1991. The author insists that such blame is...

The authors investigate how the thinness of foreign-exchange markets causes destabilization speculation, especially when exchange-rate flexibility is increased, as it has been in the countries involved in the Asian crisis. They analyze the impact of this market thinness on the dynamic capital...

Drawing on evidence from a large sample of speculative attacks in industrial and developing countries, the author argues that high interest rates do not defend currencies against speculative attacks. In fact, there is a striking lack of any systematic association between interest rates and the...

There is a conventional perception that high real interest rates are bad for economic growth. However, the authors show that close examination of the experience over the last 40 years undermines the existence of such a relationship. For much of the 1950-79 period, expost real interest rates were...

Financial liberalization was expected to make interest rates, and asset prices more volatile, with distributional consequences, such as reduced, or relocated rents, and increased competition in financial services. The author examines available data on money market, and bank interest rates for...

The authors empirically study the sensitivity of local interest rates to international interest rates and how that sensitivity is affected by a country's choice of exchange rate regime. To establish the empirical regularities, they use a reduced-form empirical approach to compute both panel and...

The literature on speculative attacks has been given new impetus by the collapse of the European currency arrangements beginning in 1992, by the Mexican peso crisis and after-effects in 1994, and most recently by speculative attacks across Asia. One stand of this literature stresses the...