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Monetary and exchange system reforms in China since the beginning of economic reform in late 1978 emphasized institution building in general and institutional and market development in the foreign exchange system and the capital market in particular.1 The development of nationally integrated money markets—that is, markets for short-term funds—is becoming a priority. This would enhance the effectiveness of monetary policy, support the capital markets in providing liquidity and funding for portfolios, and allow further progress in the operation of the foreign exchange market. Inherently related to all aspects of money market development is interest rate liberalization, an area where reforms are also lagging in China. Moreover, achievements in reforming the foreign exchange system—the exchange rate was unified as of January 1, 1994, and much progress was accomplished toward convertibility of the renminbi—make domestic interest rate flexibility highly desirable as a tool to support the exchange rate.



The Korean government launched a series of Economic Development Plans since the early 1960s aimed at growth and employment creation. During the early stage of economic development, when domestic savings were totally inadequate to meet the ambitious investment requirements, the government intervened extensively in mobilizing and allocating scarce financial resources to strategically important sectors in order to carry out the Plans. In this process, to facilitate systematic control of the financial sector by the government, commercial banks became de facto public enterprises, and various specialized banks such as the Industrial Bank of Korea and the Korea Exchange Bank were established. Moreover, a wide-ranging scheme of policy loans was introduced for the purpose of allocating the limited financial resources preferentially to specific industries and economic sectors with favorable provisions as to availability and cost.



During the past two decades the Italian financial system has undergone extensive structural change. As in many other countries, a number of regulatory revisions have enhanced the role of markets in allocating financial resources and transmitting monetary policy. In the field of banking, the reforms have helped engender more competitive deposit, credit, and interbank markets. It is in this framework that Italy’s experience with interest rate liberalization and interbank market development should be considered.