Interest Rates in the Organized Money Markets of Underdeveloped Countries

Abstract

TN CURRENT DISCUSSIONS of monetary and credit policy, a distinction is often made between its place in the general economic policies of highly developed and of underdeveloped countries. Any generalization about the significance of credit policy either in developed or in underdeveloped countries is indeed likely to require qualification when applied to any particular country. The distinction, however, has sufficient validity to make it worth while to examine carefully some of the characteristics that are usual in the money markets of the underdeveloped countries. It is generally believed that interest rates are much higher in underdeveloped than in developed countries. High interest rates are, indeed, found in developed countries, especially for consumer financing, but the amount of lending at high rates usually is relatively much smaller in developed than in underdeveloped countries. This is one of the contrasts upon which a general examination of the characteristics of money markets in underdeveloped countries should throw some light.