BIS Review 52/1997  -2-  5. One of the major objectives of financial sector reform has been to eliminate financial repression which is inherent in an administered interest rate structure and significant strides have been made in this direction. This process of change which began in late 1980s has not been abrupt but gradual.
It encourages households to spend more and firms to invest, reducing the need for monetary policy to support current economic activity and bring inflation back towards 2%, and speeding up the return to more conventional monetary policy settings. There are benefits for fiscal policy too. By lifting output and employment and lowering unemployment, reforms improve governments’ structural balances.