Do Interest Rate Controls Work? Evidence from Kenya

Released on by Mr.Emre Alper
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  • Do Interest Rate Controls Work? Evidence from Kenya Book Detail

  • Author : Mr.Emre Alper
  • Release Date : 2019-05-31
  • Publisher : International Monetary Fund
  • Genre : Business & Economics
  • Pages : 21
  • ISBN 13 : 1498313957
  • File Size : 77,77 MB
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Do Interest Rate Controls Work? Evidence from Kenya by Mr.Emre Alper PDF Summary

Book Description: This paper reviews the impact of interest rate controls in Kenya, introduced in September 2016. The intent of the controls was to reduce the cost of borrowing, expand access to credit, and increase the return on savings. However, we find that the law on interest rate controls has had the opposite effect of what was intended. Specifically, it has led to a collapse of credit to micro, small, and medium enterprises; shrinking of the loan book of the small banks; and reduced financial intermediation. We also show that interest rate caps reduced the signaling effects of monetary policy. These suggest that (i) the adverse effects could largely be avoided if the ceiling was high enough to facilitate lending to higher risk borrowers; and (ii) alternative policies could be preferable to address concerns about the high cost of credit.

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Interest Rate Liberalization

Interest Rate Liberalization

File Size : 36,36 MB
Total View : 9917 Views
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This paper undertakes a survey of theoretical considerations and an analysis of the experience of five African countries with interest rate liberalization. Desp