Friday, June 03, 2011

What is Financial Repression?

Reinhart and Sbrancia (2011) argue that the following measures are indicative of ensuing financial repression:
  1. Explicit or indirect capping or control over interest rates on government debt and deposit rates.
  2. Government ownership or control of domestic financial institutions coupled with barriers to market entry by other institutions.
  3. Creation of captive domestic markets for government debt via reserve requirements and other monetary controls.
  4. Government restrictions on the transfer of assets abroad through the imposition of capital flight laws and regulations.
Source: Reinhart, C M & Sbrancia, M B (2011), The Liquidation of Government Debt, Cambridge, MA: National Bureau of Economic Research.

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