Research Insights: How Do High Interest Rates Limit Development?
Peer Reviewed
Date issued
November 2023
Subject
Financial Friction;
Interest Rate;
Small Business;
Bank Loan;
Credit Market;
Macroeconomy;
Rating;
Labor Force;
Entrepreneurship
JEL code
O11 - Macroeconomic Analyses of Economic Development;
O16 - Financial Markets • Saving and Capital Investment • Corporate Finance and Governance;
E22 - Investment • Capital • Intangible Capital • Capacity
Country
Brazil
Category
Catalogs and Brochures
Credit markets in developing countries are characterized by large gaps between lending and deposit rates. Interest rate spreads in Brazil are high and vary significantly across similar firms. High interest rate spreads can substantially decrease a countrys output since they reduce access to credit for potentially productive firms.
