This paper is one of four in this Working Paper Series, focusing on financial liberalisation, along with those of Miller and Weller, Kupiec and Blundell-Wignall and Browne. Its main purpose is to evaluate the imperfections still affecting deregulated credit markets. In particular, the paper examines the extent to which rationing continues to be present in credit markets and its implications for credit allocation and the transmission of monetary policy. In addition, the role of deregulation in financial market fragility and instability and its macroeconomic consequences are discussed ...