Interest Rate Liberalization in China /

What might interest rate liberalization do to intermediation and the cost of capital in China? China's most binding interest rate control is a ceiling on the deposit rate, although lending rates are also regulated. Through case studies and model-based simulations, we find that liberalization wi...

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Bibliographic Details
Main Author: Feyzioglu, Tarhan
Other Authors: Porter, Nathan, Takats, Elod
Format: Journal
Language:English
Published: Washington, D.C. : International Monetary Fund, 2009.
Series:IMF Working Papers; Working Paper ; No. 2009/171
Online Access:Full text available on IMF
Description
Summary:What might interest rate liberalization do to intermediation and the cost of capital in China? China's most binding interest rate control is a ceiling on the deposit rate, although lending rates are also regulated. Through case studies and model-based simulations, we find that liberalization will likely result in higher interest rates, discourage marginal investment, improve the effectiveness of intermediation and monetary transmission, and enhance the financial access of underserved sectors. This can occur without any major disruption. International experience suggests, however, that achieving these benefits without unnecessary instability, requires vigilant supervision, governance, and monetary policy, and a flexible policy toolkit.
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Physical Description:1 online resource (29 pages)
Format:Mode of access: Internet
ISSN:1018-5941
Access:Electronic access restricted to authorized BRAC University faculty, staff and students