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November 1995 Nicaragua's dollar-equivalent and real interest rates are not unusually high by regional standards. A sustained reduction of interest rates below the regional average may be possible, but would require further major structural reform. The high commercial lending rates Nicaragua is currently experiencing, together with a perceived scarcity of credit, have often been blamed for the country's slow growth and have been considered a major failing of the adjustment program initiated in 1991. Lächler suggests that such blame is largely misplaced. Current interest rates are indeed higher than historical levels or international benchmark rates (such as LIBOR or the U.S. treasury bill rate), but those are not the appropriate comparators for Nicaragua today. On the other hand, Nicaragua's real interest rates have risen significantly in recent years and currently exceed real rates in other Central American countries. These high real rates are attributable entirely to a real currency depreciation that has been taking place since 1992, and are not greatly different from rates observed in other Latin American countries that underwent similar adjustments. Lächler explains the link between real interest rates and adjustment in Nicaragua and, in that context, explores policy options for reducing interest rates. His main conclusion: A sustained reduction in real interest rates to below those observed in neighboring countries would require further major structural changes, such as the adoption of a foreign currency standard. This paper -- a product of the Country Operations Division, Country Department II, Latin America and the Caribbean Region -- is a self-standing report prepared as a contribution to the Bank's ongoing policy dialogue with Nicaragua on important economic issues facing the country.
The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.
This paper focuses on negative interest rate policies and covers a broad range of its effects, with a detailed discussion of findings in the academic literature and of broader country experiences.
This pamphlet is adapted from Chapter 1 of Silent Revolution: The International Monetary Fund, 1979-89, by the same author. That book is full of history of the evolution of the Fund during 11 years in which the institution truly came of age as a participant in the international financial system.
This work provides a thorough analytical review of the processes that led to the transformation of many Latin American economies during the last decade. The author examines every aspect of adjustment and reform since 1980 and suggests alternative ways to consolidate the achievements.
This book, first published in 1987, is a solid, analytical exploration of the complex dynamics of the revolutionary economic transformation from 1979 to 1986. This collection of eleven essays provides a clear picture of the goals, internal debates, external influences and shifting policy decisions which affected the efforts of the Sandinista government. They help to clarify the dynamics between soaring food prices and falling wages, and explain the complex relationship between the private sector and the state. They also document the policies of the Reagan administration toward the Sandinista government.