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Financial Liberalization in Developing Countries

In: Policy Choices for the 1990s

Author

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  • Bela Balassa

    (The Johns Hopkins University)

Abstract

McKinnon and Shaw consider financial liberalization as a mainstay of economic reforms in developing countries. McKinnon goes as far as to “define ‘economic development’ as the reduction of the great dispersion in social rates of return to existing and new investments under domestic entrepreneurial control” (1973, p. 9). He adds: “Economic development so defined is necessary and sufficient to generate high rates of saving and investment (accurately reflecting social and private time preference), the adoption of best-practice technologies, and learning-by-doing” (ibid.). Shaw suggests that “the argument for liberalization in finance is that scarcity prices for savings increase rates of saving, improve savings allocation, induce some substitution of labor for capital equipment, and assist in income equalization” (1973, p. 121).

Suggested Citation

  • Bela Balassa, 1993. "Financial Liberalization in Developing Countries," Palgrave Macmillan Books, in: Policy Choices for the 1990s, chapter 7, pages 223-241, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-13033-7_7
    DOI: 10.1007/978-1-349-13033-7_7
    as

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