Number of Downlaods: 30
Published Date: Nov 18, 1994
Assessing the Impact of Financial Sector Reform on Pakistan’s Economy (R-6)
Shahrukh Rafi Khan and Safiya Aftab, SDPI
1993 (Published in Pakistan Journal of Applied Economics, Vol 10, No. 1 & 2, 1994.)
The main objective of this paper is to test neo-liberal hypotheses about the benefits of financial liberalization. It begins with a review of the history of financial sector reforms in Pakistan. It next evaluates the utility of interest rate liberalization, analyzes the political economy of such liberalization, and discusses the success of bank denationalization. There is not a strong case for interest rate liberalization because the real saving rate is not responsive to interest rates and financial saving is only modestly responsive. Thus, the authors suggest the imposition of an interest rate ceiling as the most progressive way of dealing with the deficit. The one positive reform is bank denationalization.