Warman, Fanny and Thirlwall, Anthony P. (1994) Interest-rates, Saving, Investment and Growth in Mexico 1960 - Tests of the Finacial Libralization Hypothesis. Journal of Development Studies, 30 (3). pp. 629-649. ISSN 0022-0388. (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided)
The theory of financial liberalisation argues that rising real interest rates induces more saving and investment and therefore acts as a positive stimulus to economic growth. This hypothesis is tested for Mexico over the period 1960-90 making the important distinction between financial saving and total saving. Financial saving isfound to be positively related to real interest rates partly through capital flows and partly through domestic asset substitution, but total saving is invariant with respect to real interest rates. Investment is positively related to the supply of credit from the banking system, but the net effect of interest rates on investment is negative. Furthermore, taking McKinnon's 'virtuous circle' model of economic growth shows no favourable effects of interest rates on economic growth. It is concluded that any favourable effect of financial liberalisation and higher real interest rates on economic growth must come through raising the productivity of investment.
|Subjects:||H Social Sciences > HB Economic Theory|
|Divisions:||Faculties > Social Sciences > School of Economics|
|Depositing User:||P. Ogbuji|
|Date Deposited:||09 Jun 2009 16:26|
|Last Modified:||10 Jun 2014 08:03|
|Resource URI:||https://kar.kent.ac.uk/id/eprint/20096 (The current URI for this page, for reference purposes)|