Evidence on patents (one measure of innovation) and measures of productivity suggests that those countries that have extensively liberalized (such as Japan, the United Kingdom, Finland and the United States) have experienced greater innovation and larger gains in efficiency. Evidence from the telecommunications industry also suggests that the technological diffusion rate is faster under a more competitive regulatory regime.
Indeed, the Bank Rate was reduced further by half a percentage point to 5.5 percent in August. Accordingly, commercial banks also reduced the prime lending rate by half a percentage point to 7 percent. Nevertheless, there was a build-up of excess liquidity in the banking system as commercial bank credit expansion slowed relative to the increase in deposits.