Modernization of financial markets: An analysis of informal credit markets in prewar Japan
Juro Teranishi
World Development 22(3): 315-322
1994
ISSN/ISBN: 0305-750X DOI: 10.1016/0305-750x(94)90124-4Document Number: 280627
Why are informal credit markets in developing countries so persistent and difficult to eradicate? This paper argues that one of the basic reasons for this lies in the efficiency of information channels between informal lenders and their customers. This hypothesis is tested by estimating the demand and supply functions of informal credit using cross-section regional data for prewar Japan. The effectiveness of the so-called high deposit rate policy based on Mc Kinnon-Shaw theory is also evaluated from this viewpoint.