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Towards Sustainable Development in Central America and the Caribbean pp 30–56Cite as

Palgrave Macmillan

The Fruits of Interest: Financial Liberalization and Banking in Central America

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Abstract

In the first half of the 1990s, the banking systems in most Central American countries underwent a major change following the introduction of policies of financial liberalization.2 The advocates of financial liberalization argue that the elimination of government controls will, by allowing interest rates to rise, encourage higher savings and thereby make more funds available for investment. They claim that higher interest rates will in addition result in finance being directed towards the most profitable investment projects, and that this will enable countries to achieve higher rates of growth. They also believe that a competitive system of privately owned banks is required so that costs will be kept to a minimum, and banks will have an incentive to seek out successful clients.

I am grateful to Laurence Harris, Hansjorg Herr and the editors of this book for their comments on an earlier version of this chapter.

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Authors
  1. Trevor Evans
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Editor information

Editors and Affiliations

  1. Department of Economics, University of Lund, Sweden

    Anders Danielson (Associate Professor) (Associate Professor)

  2. Erasmus University, Rotterdam, The Netherlands

    A. Geske Dijkstra (Senior Lecturer in Economics, Faculty of Social Sciences) (Senior Lecturer in Economics, Faculty of Social Sciences)

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© 2001 Palgrave Publishers Ltd

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Evans, T. (2001). The Fruits of Interest: Financial Liberalization and Banking in Central America. In: Danielson, A., Dijkstra, A.G. (eds) Towards Sustainable Development in Central America and the Caribbean. Palgrave Macmillan, London. https://doi.org/10.1057/9780230502123_3

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