Chapter 13: Financial Policy
Chapter Learning Objectives
After reading the chapter, you ought to understand and be able to explain:
- The functions and characteristics of the financial systems in developing countries.
- The definition of money and liquid assets.
- The diversity of inflation experience in developing countries and the pros and cons of using inflation as a device to mobilize forced savings.
- How inflation affects real interest rates and how real interest rates, in turn, affect savings and the demand for liquid assets.
- The characteristics, causes, and consequences of deep finance versus shallow finance.
- The character of informal credit markets in developing countries.
- How management of monetary policy depends on the exchange-rate regime.
- The causes and consequences of excessive money supply growth.
- The main tools of monetary policy in developing countries. 10. The causes and consequences of financial panics.
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