Open AccessAn Analytical Approach to Interest Rate Determination in Developing Countries
Author(s) -
Mohsin S. Khan
Publication year - 1985
Publication title -
pakistan development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.154
H-Index - 26
ISSN - 0030-9729
DOI - 10.30541/v24i3-4pp.481-495
Subject(s) - economics , interest rate , developing country , macroeconomics , investment (military) , work (physics) , financial market , process (computing) , monetary economics , finance , economic growth , mechanical engineering , engineering , politics , political science , computer science , law , operating system
The role of interest rates in the development process has beenstudied extensively in recent years. Following upon the seminal work ofMcKinnon (1973), there have been a number of theoretical and empiricalstudies examining the relationship between financial development andeconomic growth, the effect of changes in real interest rates on savingsand investment, and more generally, the pros and cons of amarket-oriented financial system.1 Broadly speaking, there is now ampleempirical evidence supporting the original claim by McKinnon [10] thatthere is a positive association between the degree of development of thefinancial sector, resulting primarily from a freer structure of interestrates, and the overall economic performance of developingcountries.