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Interest rate reform and private investment behaviour in developing countries: Evidence from Peru

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  • Corsepius, Uwe

Abstract

The principle aims to be achieved by financial liberalization in financially repressed developing countries are to increase the volume of investments and to improve their allocative efficiency. The theoretical and empirical literature stresses the importance of raising real interest rates in countries .with interest rate ceilings and permanently or at least temporary negative real interest rates. This reform proposal is based on the expectation that higher real interest rates would induce private households to save more in the commercial banking system, thereby enabling financial institutions to expand their credit supply to private firms. Assuming that private investments were constrained by the non-availability of credit before the financial reform was implemented, those firms are supposed to increase their real capital formation.

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  • Corsepius, Uwe, 1988. "Interest rate reform and private investment behaviour in developing countries: Evidence from Peru," Kiel Working Papers 317, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:317
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    References listed on IDEAS

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    1. Blejer, Mario I, 1979. "The Demand for Money and the Variability of the Rate of Inflation: Some Empirical Results," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(2), pages 545-549, June.
    2. Stanley Fischer & Franco Modigliani, 1978. "Towards an understanding of the real effects and costs of inflation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 114(4), pages 810-833, December.
    3. Foster, Edward, 1978. "The Variability of Inflation," The Review of Economics and Statistics, MIT Press, vol. 60(3), pages 346-350, August.
    4. repec:ilo:ilowps:248590 is not listed on IDEAS
    5. Fischer, Stanley, 1981. "Towards an understanding of the costs of inflation: II," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 15(1), pages 5-41, January.
    6. Cho, Yoon Je, 1986. "Inefficiencies from Financial Liberalization in the Absence of Well-Functioning Equity Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(2), pages 191-199, May.
    7. Roe, Alan,, 1986. "Interest rates, employment and income distribution: a review of issues," ILO Working Papers 992485903402676, International Labour Organization.
    8. Fry, Maxwell J., 1982. "Models of financially repressed developing economies," World Development, Elsevier, vol. 10(9), pages 731-750, September.
    9. Brunner, Karl & Meltzer, Allan H., 1981. "The costs and consequences of inflation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 15(1), pages 1-4, January.
    10. Nunnenkamp, Peter, 1986. "Liberalisierung der Finanzmärkte und Ersparnisbildung in Indonesien," Open Access Publications from Kiel Institute for the World Economy 1314, Kiel Institute for the World Economy (IfW Kiel).
    11. Corsepius, Uwe, 1986. "Erfolgsbedingungen einer Zinsliberalisierung in Entwicklungsländern," Kiel Working Papers 251, Kiel Institute for the World Economy (IfW Kiel).
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    Cited by:

    1. Corsepius, Uwe, 1989. "Peru at the brink of economic collapse: Current problems and policy options," Kiel Discussion Papers 153, Kiel Institute for the World Economy (IfW Kiel).

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