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Interest rate policies in selected developing countries, 1970-1982 (English)

This paper examines the level and structure of interest rates ford the period 1970-82 in ten developing countries: Bangladesh, Kenya, Korea, Morocco, Nigeria, Pakistan, Peru, Thailand, Turkey and Uruguay. In addition, the paper briefly examines the countries' broader financial and economic policies. In most cases, nominal interest rates were controlled by the governments and varied substantially less than inflation during this period. As a result, real interest rates rose (or fell) with declines (or increases) in inflation; hence, highly negative real rates were a direct reflection of high inflation. A simple grouping of nine of the ten sample countries into two categories demonstrates this clearly: the first group (six countries) had low inflation and mildly negative real rates, which averaged within a few percentage points of the corresponding averages for the industrialized countries; and the second group (three countries) had high inflation and highly negative real rates, which averaged ten to twenty-five percentage points below rates in the industrialized countries. The tenth country, Uruguay, switched from the high inflation, highly negative real rate group to a high inflation, highly positive and volatile real rate category about half way through the period, due to a major liberalization, and thus did not fall into either category.

Details

  • Author

    Hanson, James A., Neal, Craig R.

  • Document Date

    1985/01/31

  • Document Type

    Staff Working Paper

  • Report Number

    SWP753

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    Pakistan,

    Thailand,

    Uruguay,

    Türkiye,

    Peru,

    Nigeria,

    Korea,

    Democratic People's Republic of,

    Morocco,

    Kenya, Bangladesh

  • Region

    Europe and Central Asia, Latin America & Caribbean, East Asia and Pacific, Middle East and North Africa, Africa, South Asia,

  • Disclosure Date

    2010/07/01

  • Doc Name

    Interest rate policies in selected developing countries, 1970-1982

  • Keywords

    real rate;implications for development;real interest rate;deposit rate;real interest rate on deposits;uncovered interest rate parity;financial sector policy;high real interest rate;positive real interest rates;interest rate policy;nominal interest rate;negative real interest rate;treasury bill rate;flows of international capital;structure of interest rates;average rate of inflation;real rate of interest;high rates of inflation;ceilings on interest rates;nominal rate of interest;lending rate;real deposit rates;financial market;interest rate control;direct credit;interest rate structure;financial sector liberalization;allocation of resource;short term credit;Exchange rate policies;exchange rate policy;high inflation;public sector borrowing;allocation of credit;decline in inflation;open capital market;Effective interest rate;inflation rate;average inflation rate;rate of change;consumer price index;domestic financial market;international capital market;high inflation rate;impact of tax;world interest rate;financial system;interest rate regime;types of instrument;transfer of fund;public sector deficit;open financial market;higher interest rate;exchange rate reform;increase in inflation;effective tax rate;Freely Convertible Currency;availability of data;interest rate differential;government policy instrument;international capital flow;domestic financial sector;terms of lending;supply of credit;financial sector reform;financial market liberalization;world financial market;official exchange rate;balance of payment;domestic interest rate;rate of devaluation;debt service burden;foreign currency deposit;foreign currency transaction;prime lending rate;domestic resource mobilization;portion of total;price to consumer;macroeconomic policy framework;interest rate liberalization;foreign exchange market;degree of fragmentation;term deposits;Exchange Rates;market force;compensating balance;

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Citation

Hanson, James A. Neal, Craig R.

Interest rate policies in selected developing countries, 1970-1982 (English). Staff working paper ; no. SWP 753 Washington, D.C. : The World Bank http://documents.worldbank.org/curated/en/750781468758731740/Interest-rate-policies-in-selected-developing-countries-1970-1982