Business Intelligence

The Missing Link: The Finance-growth Nexus And The Guyanese Growth Stagnation

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Executive Summary

The theory underpinning financial liberalization postulates that unregulated financial markets are growth augmenting. Guyana has been a model reformer since 1988 implementing market friendly policies. Growth performance, however, has been subdued. This paper argues that natural entry barriers necessitate an oligopolistic banking structure, which follows a mark-up threshold loan interest rate rule at which business credit is constrained. Empirical validation of the mark-up loan rate comes from a bank excess liquidity preference curve that is horizontal at the high threshold rate.

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