Interest Rate Liberalization And Economic Growth: Conceptual Issues And Empirical Evidence

This paper describes the role that interest rates liberalization are likely to play in developing countries, It begins by discussing the traditional justifications for interest rate liberalization, and then provides some of the empirical evidence. It then discusses a range of prerequisites for successful interest rates liberalization. The conclusion from the analysis is that the interest rates liberalization is likely to be of second order importance after the development of good, financial, and monetary institutions in developing countries. A focus on institutional reforms rather than on the interest rate liberalization may encourage developing countries to be healthier and less prone to the crises that we have seen in recent years.