Inflation and Monetary Policy in Pacific Basin Developing Economies

The Financial Repression‐liberalization Debate: Taking Stock, Looking for a Synthesis

“…Fry (, , ) corroborate the positive relationship between the real interest rate, or the deposit rate, savings and economic growth. A rise in deposit rates will have a positive effect on demand for money in real terms and a negative effect on inflation.…”

“…The results we obtain are mixed. Fry (, , ), Tybout (), Laumas (), Harris et al . () and Khan and Hasan () find evidence, which support financial liberalization policies.…”

“…A common feature of these models is the role of class conflict or institutions on wage rate determination and the dependence of inflation on markup pricing by firms over labour, imports and working capital costs (Fry, , p. 110). Hence, the balance of power between capitalists and workers is important for the determination of inflation as opposed to Fry () assumption that inflation is a monetary phenomenon.…”

Adopting Currency Convertibility: Experiences and Monetary Policy Considerations for Advanced Developing Countries

“…However, these results are obtained in an analysis of market-determined financial structures; another degree of freedom exists when credit policy is subject to direct intervention by the monetary authorities, as is the case still in many developing countries, and was earlier in industrial countries also. Fry (1992) finds in a study of the Pacific Basin developing market economies that some of these economies belong in the latter group. As Fry points out, authorities in some of the Pacific Basin economies simply do not rely on their markets for monetary policy implementation so that nonprice rationing can ensure that domestic credit targets are met regardless of interest rate movements.…”

“…2/ The obligations are consistent with domestic regulations, but countries are nonetheless required to ensure that domestic regulations do not impede cross-border competition and are applied in a nondiscriminatory manner to resident and nonresident enterprises alike. It could be noted that any form of intervention in the economic systems of two countries could give rise to effective restrictions or incentives for transfers of cross-border resources, including differential income tax I/ For discussion of the OECD codes see OECD (1990 and1992) and Ley (1989).…”