Cover IMF Working Papers
Buy Book in Print
Interest Rates, Credit Rationing, and Investment in Developing Countries
Author:
Ms. Mwanza Nkusu
Search for other papers by Ms. Mwanza Nkusu in
Current site
Google Scholar Close
Series:
IMF Working Papers
Volume/Issue:
Volume 2003: Issue 063
Language:
English
Publication Date:
01 Mar 2003
DOI:
https://doi.org/10.5089/9781451848441.001
ISBN:
9781451848441
ISSN:
1018-5941
Pages:
31
Keywords:
WP; Credit; developing countries; interest rates; institutions; investment; deposit rate; representative bank; sound interest rate policy; investment equation; lending process; loan rate; rate of inflation; rates in a liberalized environment; expected return; Bank credit; Deposit rates; Currencies; Loans
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Download PDF (820.7 KB) Download Epub
This paper examines the impact of interest rates and inflation on bank loans and investment within a framework that mimics the financial sectors prevailing in most low-income developing countries. The paper emphasizes the importance of treating the lending and deposit rates of interest as distinct parameters in investment equations. The spread between the two rates is indicative of default risk and has a negative impact on incremental loan amounts associated with higher lending rates, in particular in economies with flawed institutions. The model presented in the paper highlights the importance of promoting macroeconomic stability and upgrading institutions and informational infrastructure.
  • Collapse
  • Expand
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund