Issues in Interest Rate Management and Liberalization

Sérgio Pereira Leite and V. Sundararajan
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Sérgio Pereira Leite: International Monetary Fund
V. Sundararajan: International Monetary Fund

IMF Staff Papers, 1990, vol. 37, issue 4, 735-752

Abstract: The transition strategy from administratively set interest rates to market rates is discussed. Despite worldwide trends toward financial liberalization, few monetary authorities are prepared to accept as reasonable any interest rate level that is market determined. The paper suggests some helpful indicators to assess the adequacy of interest rates and discusses factors that contribute to a smooth liberalization process. The main conclusion is that interest rate liberalization is not synonymous with laissezfaire policies, but requires the replacement of the administratively set interest rates by indirect monetary management techniques that operate through the market.

Date: 1990
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