False issues in the debate on interest rate policies in less developed countries

Abstract

The work argues that many of the issues that have figured in interest rate policy discussions in the context of less developed countries are false, arising partly from terminological nuances, but largely from incorrect premises and approaches. As a result, there has been a fair amount of needless obfuscation in the design and pursuit of interest rate policies, and misdirection of effort in empirical research. An attempt is therefore made to unravel the various issues involved in the logical basis of the interest rate policies pursued in less developed countries, and after winnowing the false ones, to synthesise them in a consistent and cohesive fashion so that the real import of such policies emerges more clearly.

JEL: E43, E52, E63