Do Interest Rate Controls Work Evidence From Kenya

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Do Interest Rate Controls Work? Evidence from Kenya

Mr.Emre Alper,Mr.Benedict J. Clements,Mr.Niko A Hobdari,Rafel Moyà Porcel
Do Interest Rate Controls Work Evidence from Kenya Book PDF

Author : Mr.Emre Alper,Mr.Benedict J. Clements,Mr.Niko A Hobdari,Rafel Moyà Porcel
Publisher : International Monetary Fund
Page : 21 pages
File Size : 51,6 Mb
Release : 2019-05-31
Category : Business & Economics
ISBN : 9781498317696

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Do Interest Rate Controls Work? Evidence from Kenya by Mr.Emre Alper,Mr.Benedict J. Clements,Mr.Niko A Hobdari,Rafel Moyà Porcel Pdf

This paper reviews the impact of interest rate controls in Kenya, introduced in September 2016. The intent of the controls was to reduce the cost of borrowing, expand access to credit, and increase the return on savings. However, we find that the law on interest rate controls has had the opposite effect of what was intended. Specifically, it has led to a collapse of credit to micro, small, and medium enterprises; shrinking of the loan book of the small banks; and reduced financial intermediation. We also show that interest rate caps reduced the signaling effects of monetary policy. These suggest that (i) the adverse effects could largely be avoided if the ceiling was high enough to facilitate lending to higher risk borrowers; and (ii) alternative policies could be preferable to address concerns about the high cost of credit.

Financial Repression is Knocking at the Door, Again

Mr.Etibar Jafarov,Mr.Rodolfo Maino,Mr.Marco Pani
Financial Repression is Knocking at the Door Again Book PDF

Author : Mr.Etibar Jafarov,Mr.Rodolfo Maino,Mr.Marco Pani
Publisher : International Monetary Fund
Page : 66 pages
File Size : 44,8 Mb
Release : 2019-09-30
Category : Business & Economics
ISBN : 9781513512488

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Financial Repression is Knocking at the Door, Again by Mr.Etibar Jafarov,Mr.Rodolfo Maino,Mr.Marco Pani Pdf

Financial repression (legal restrictions on interest rates, credit allocation, capital movements, and other financial operations) was widely used in the past but was largely abandoned in the liberalization wave of the 1990s, as widespread support for interventionist policies gave way to a renewed conception of government as an impartial referee. Financial repression has come back on the agenda with the surge in public debt in the wake of the Global Financial Crisis, and some countries have reintroduced administrative ceilings on interest rates. By distorting market incentives and signals, financial repression induces losses from inefficiency and rent-seeking that are not easily quantified. This study attempts to assess some of these losses by estimating the impact of financial repression on growth using an updated index of interest rate controls covering 90 countries over 45 years. The results suggest that financial repression poses a significant drag on growth, which could amount to 0.4-0.7 percentage points.

Interest Rate Liberalization

Mr.Bart Turtelboom
Interest Rate Liberalization Book PDF

Author : Mr.Bart Turtelboom
Publisher : International Monetary Fund
Page : 46 pages
File Size : 43,9 Mb
Release : 1991-12-01
Category : Business & Economics
ISBN : 9781451939187

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Interest Rate Liberalization by Mr.Bart Turtelboom Pdf

This paper undertakes a survey of theoretical considerations and an analysis of the experience of five African countries with interest rate liberalization. Despite substantial progress in monetary policy reforms, liberalization has only partially affected the level and variability of interest rates. Several factors—macroeconomic instability, oligopolistic financial markets, the absence of developed capital markets, as well as the sequencing of the liberalization programs and the asymmetric availability of information—explain the increase in the spread between lending and deposit rates as well as the rather inflexible pattern of interest rates during the transition to a market-based financial system.

Kenya

International Monetary Fund
Kenya Book PDF

Author : International Monetary Fund
Publisher : International Monetary Fund
Page : 29 pages
File Size : 55,8 Mb
Release : 2008-10-17
Category : Business & Economics
ISBN : 9781451821192

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Kenya by International Monetary Fund Pdf

This Selected Issues paper on Kenya reviews Kenya’s external stability in a context where the exchange rate has strengthened and capital inflows are playing an increasingly important role. Kenya’s external current account deficit has widened, reflecting strong import volumes as well as rising import prices, particularly for oil, but external debt as a percent of GDP has declined steadily. Underlying these developments have been a steady increase in capital inflows and a remarkable rebound of economic growth since 2003 after two decades of stagnation.

Negative Interest Rates

Luís Brandão Marques,Marco Casiraghi,Gaston Gelos,Güneş Kamber,Roland Meeks
Negative Interest Rates Book PDF

Author : Luís Brandão Marques,Marco Casiraghi,Gaston Gelos,Güneş Kamber,Roland Meeks
Publisher : International Monetary Fund
Page : 84 pages
File Size : 43,6 Mb
Release : 2021-03-03
Category : Business & Economics
ISBN : 9781513570082

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Negative Interest Rates by Luís Brandão Marques,Marco Casiraghi,Gaston Gelos,Güneş Kamber,Roland Meeks Pdf

This paper focuses on negative interest rate policies and covers a broad range of its effects, with a detailed discussion of findings in the academic literature and of broader country experiences.

Structural Issues in the Kenyan Financial System

Thorsten Beck
Structural Issues in the Kenyan Financial System Book PDF

Author : Thorsten Beck
Publisher : World Bank Publications
Page : 20 pages
File Size : 51,9 Mb
Release : 2004
Category : Finance
ISBN : 8210379456XXX

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Structural Issues in the Kenyan Financial System by Thorsten Beck Pdf

Although by regional standards Kenya's financial system is relatively well developed and diversified, major structural impediments prevent it from reaching its full potential. Cross-country comparisons, however, show the importance of a well developed financial sector for long-term economic growth and poverty alleviation. Experience from other developing economies has shown the detrimental effect of government ownership and the positive impact that foreign bank ownership can have on the development of a market-based financial system. Analyzing and decomposing the high interest rate spreads and margins in Kenya helps identify structural impediments that drive the high cost of and low access to financial services. The limited information sharing on debtors, deficiencies in the legal and judicial system, the limited number of strong and reputable banks, and nontransparency and uncertainty in the banking market are major impediments to the development of Kenya's financial system, and to reducing spreads and widening access. This paper--a product of the Finance Team, Development Research Group--is part of a larger effort in the group to understand the determinants of financial sector development.

The Japanese Banking Crisis of the 1990's

Mr.Akihiro Kanaya,Mr.David Woo
The Japanese Banking Crisis of the 1990 s Book PDF

Author : Mr.Akihiro Kanaya,Mr.David Woo
Publisher : International Monetary Fund
Page : 48 pages
File Size : 49,7 Mb
Release : 2000-01-01
Category : Business & Economics
ISBN : 9781451842401

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The Japanese Banking Crisis of the 1990's by Mr.Akihiro Kanaya,Mr.David Woo Pdf

For a large part of the past decade, Japan has witnessed a steady deterioration in the health of its banking system. This paper examines what went wrong and why it has taken so long for the system to recover. While the paper traces the roots of the crisis to accelerated deregulation and deepening of capital markets without an appropriate adjustment in the regulatory framework, it identifies weak corporate governance and regulatory forbearance as the two factors behind what might have been an unnecessary prolongation of the distress of the financial system.

Financial Repression is Knocking at the Door, Again

Mr.Etibar Jafarov,Mr.Rodolfo Maino,Mr.Marco Pani
Financial Repression is Knocking at the Door Again Book PDF

Author : Mr.Etibar Jafarov,Mr.Rodolfo Maino,Mr.Marco Pani
Publisher : International Monetary Fund
Page : 66 pages
File Size : 43,8 Mb
Release : 2019-09-30
Category : Business & Economics
ISBN : 9781513516011

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Financial Repression is Knocking at the Door, Again by Mr.Etibar Jafarov,Mr.Rodolfo Maino,Mr.Marco Pani Pdf

Financial repression (legal restrictions on interest rates, credit allocation, capital movements, and other financial operations) was widely used in the past but was largely abandoned in the liberalization wave of the 1990s, as widespread support for interventionist policies gave way to a renewed conception of government as an impartial referee. Financial repression has come back on the agenda with the surge in public debt in the wake of the Global Financial Crisis, and some countries have reintroduced administrative ceilings on interest rates. By distorting market incentives and signals, financial repression induces losses from inefficiency and rent-seeking that are not easily quantified. This study attempts to assess some of these losses by estimating the impact of financial repression on growth using an updated index of interest rate controls covering 90 countries over 45 years. The results suggest that financial repression poses a significant drag on growth, which could amount to 0.4-0.7 percentage points.

The Global Informal Workforce

International Monetary Fund
The Global Informal Workforce Book PDF

Author : International Monetary Fund
Publisher : International Monetary Fund
Page : 414 pages
File Size : 53,8 Mb
Release : 2021-07-23
Category : Business & Economics
ISBN : 9781513575919

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The Global Informal Workforce by International Monetary Fund Pdf

The Global Informal Workforce is a fresh look at the informal economy around the world and its impact on the macroeconomy. The book covers interactions between the informal economy, labor and product markets, gender equality, fiscal institutions and outcomes, social protection, and financial inclusion. Informality is a widespread and persistent phenomenon that affects how fast economies can grow, develop, and provide decent economic opportunities for their populations. The COVID-19 pandemic has helped to uncover the vulnerabilities of the informal workforce.

Monetary Policy in Low Financial Development Countries

Juan Antonio Morales,Paul Reding
Monetary Policy in Low Financial Development Countries Book PDF

Author : Juan Antonio Morales,Paul Reding
Publisher : Oxford University Press
Page : 360 pages
File Size : 53,6 Mb
Release : 2021-07-22
Category : Business & Economics
ISBN : 9780192597021

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Monetary Policy in Low Financial Development Countries by Juan Antonio Morales,Paul Reding Pdf

Monetary Policy in Low Financial Development Countries provides a broad coverage of the monetary policy issues faced by developing countries with low financial depth. These low and lower middle income countries are characterized by the predominance of bank finance, shallow financial markets, low financial inclusion, weak integration with world capital markets, and a high degree of informality in economic activity. Monetary policy acquires special twists, making it different in many aspects from the policies followed in advanced and emerging market economies. This book covers the main facets of monetary policy making, using an approach that combines discussions of theoretical arguments, of results from empirical studies and of relevant policy experiences. It presents the monetary policy instruments that central banks rely on in these countries. It assesses the specificities of their monetary transmission mechanism, i.e. the way central banks' actions affect output and prices. It evaluates the advantages, drawbacks, and challenges of the different nominal anchors they may choose from: exchange rate targeting, monetary targeting, and inflation targeting. This discussion is set against the background of the three main goals pursued by central banks: price, output, and financial stability. Particular attention is devoted to the issue of the credibility of central banks and to the trade-offs they face when external shocks, to which these countries are very vulnerable, lead to conflicts among the three goals they pursue. The authors also cover more specific topics, such as the coordination between monetary and fiscal policy, the challenges raised by dollarization, the implications of informal labour markets and of microfinance institutions for monetary policy-making, as well as the role of models for forecasting and policy evaluation by central banks.

Central Bank Credit to the Government

Mr.Luis Ignacio Jácome,Ms.Marcela Matamoros-Indorf,Ms.Mrinalini Sharma,Mr.Simon Townsend
Central Bank Credit to the Government Book PDF

Author : Mr.Luis Ignacio Jácome,Ms.Marcela Matamoros-Indorf,Ms.Mrinalini Sharma,Mr.Simon Townsend
Publisher : International Monetary Fund
Page : 44 pages
File Size : 46,5 Mb
Release : 2012-01-01
Category : Business & Economics
ISBN : 9781463957391

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Central Bank Credit to the Government by Mr.Luis Ignacio Jácome,Ms.Marcela Matamoros-Indorf,Ms.Mrinalini Sharma,Mr.Simon Townsend Pdf

Using a central bank legislation database, this paper documents and analyzes worldwide institutional arrangements for central bank lending to the government and identifies international practices. Key findings are: (i) in most advanced countries, central banks do not finance government expenditure; (ii) in a large number of emerging and developing countries, short-term financing is allowed in order to smooth out tax revenue fluctuations; (iii) in most countries, the terms and conditions of these loans are typically established by law, such that the amount is capped at a small proportion of annual government revenues, loans are priced at market interest rates, and their maturity falls within the same fiscal year; and (iv) in the vast majority of countries, financing other areas of the state, such as provincial governments and public enterprises, is not allowed. The paper does not address central banks' financial support during financial crises.

Global Waves of Debt

M. Ayhan Kose,Peter Nagle,Franziska Ohnsorge,Naotaka Sugawara
Global Waves of Debt Book PDF

Author : M. Ayhan Kose,Peter Nagle,Franziska Ohnsorge,Naotaka Sugawara
Publisher : World Bank Publications
Page : 403 pages
File Size : 47,7 Mb
Release : 2021-03-03
Category : Business & Economics
ISBN : 9781464815454

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Global Waves of Debt by M. Ayhan Kose,Peter Nagle,Franziska Ohnsorge,Naotaka Sugawara Pdf

The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.

Monetary Transmission Mechanism in the East African Community

Mr.Hamid Reza Davoodi,Mr.S. V. S. Dixit,Gabor Pinter
Monetary Transmission Mechanism in the East African Community Book PDF

Author : Mr.Hamid Reza Davoodi,Mr.S. V. S. Dixit,Gabor Pinter
Publisher : International Monetary Fund
Page : 59 pages
File Size : 42,9 Mb
Release : 2013-02-06
Category : Business & Economics
ISBN : 9781475553499

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Monetary Transmission Mechanism in the East African Community by Mr.Hamid Reza Davoodi,Mr.S. V. S. Dixit,Gabor Pinter Pdf

Do changes in monetary policy affect inflation and output in the East African Community (EAC)? We find that (i) Monetary Transmission Mechanism (MTM) tends to be generally weak when using standard statistical inferences, but somewhat strong when using non-standard inference methods; (ii) when MTM is present, the precise transmission channels and their importance differ across countries; and (iii) reserve money and the policy rate, two frequently used instruments of monetary policy, sometimes move in directions that exert offsetting expansionary and contractionary effects on inflation—posing challenges to harmonization of monetary policies across the EAC and transition to a future East African Monetary Union. The paper offers some suggestions for strengthening the MTM in the EAC.

Central Bank Balances and Reserve Requirements

Mr.Simon Gray
Central Bank Balances and Reserve Requirements Book PDF

Author : Mr.Simon Gray
Publisher : International Monetary Fund
Page : 57 pages
File Size : 41,6 Mb
Release : 2011-02-01
Category : Business & Economics
ISBN : 9781455217908

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Central Bank Balances and Reserve Requirements by Mr.Simon Gray Pdf

Most central banks oblige depository institutions to hold minimum reserves against their liabilities, predominantly in the form of balances at the central bank. The role of these reserve requirements has evolved significantly over time. The overlay of changing purposes and practices has the result that it is not always fully clear what the current purpose of reserve requirements is, and this necessarily complicates thinking about how a reserve regime should be structured. This paper describes three main purposes for reserve requirements - prudential, monetary control and liquidity management - and suggests best practice for the structure of a reserves regime. Finally, the paper illustrates current practices using a 2010 IMF survey of 121 central banks.

Dedollarization

Mr.Romain Veyrune,Annamaria Kokenyne,Mr.Jeremy Ley
Dedollarization Book PDF

Author : Mr.Romain Veyrune,Annamaria Kokenyne,Mr.Jeremy Ley
Publisher : International Monetary Fund
Page : 52 pages
File Size : 50,8 Mb
Release : 2010-08-01
Category : Business & Economics
ISBN : 9781455202225

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Dedollarization by Mr.Romain Veyrune,Annamaria Kokenyne,Mr.Jeremy Ley Pdf

This paper provides a summary of the key policies that encourage dedollarization. It focuses on cases in which the authorities’ intention is to gain greater control of monetary policy and draws on the experiences of countries that have successfully dedollarized. Unlike previous work on the subject, this paper examines both macroeconomic stabilization policies and microeconomic measures, such as prudential regulation of the financial system. This study is also the first attempt to make extensive use of the foreign exchange regulation data reported in the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions. The main conclusion is that durable dedollarization depends on a credible disinflation plan and specific microeconomic measures.