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The Fruits of Interest: Financial Liberalization and Banking in Central America

In: Towards Sustainable Development in Central America and the Caribbean

Author

Listed:
  • Trevor Evans

Abstract

In the first half of the 1990s, the banking systems in most Central American countries underwent a major change following the introduction of policies of financial liberalization.2 The advocates of financial liberalization argue that the elimination of government controls will, by allowing interest rates to rise, encourage higher savings and thereby make more funds available for investment. They claim that higher interest rates will in addition result in finance being directed towards the most profitable investment projects, and that this will enable countries to achieve higher rates of growth. They also believe that a competitive system of privately owned banks is required so that costs will be kept to a minimum, and banks will have an incentive to seek out successful clients.

Suggested Citation

  • Trevor Evans, 2001. "The Fruits of Interest: Financial Liberalization and Banking in Central America," Palgrave Macmillan Books, in: Anders Danielson & A. Geske Dijkstra (ed.), Towards Sustainable Development in Central America and the Caribbean, chapter 3, pages 30-56, Palgrave Macmillan.
  • Handle: RePEc:pal:palchp:978-0-230-50212-3_3
    DOI: 10.1057/9780230502123_3
    as

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