financial repression

A gold standard cannot be used for what some economists call financial repression.

This process is comparable to financial repression in real economies.

Financial repression can be particularly effective at liquidating debt.

Financial repression is any of the measures that governments employ to channel funds to themselves, that, in a deregulated market, would go elsewhere.

Financial repression and optimal taxation.

Giovannini and de Melo (1993) calculated the size of the financial repression tax for a 24 emerging market country sample from 1974-1987.

But this "financial repression", in which a captive financial system accepts sub-par returns, was precisely what helped shrink Britain's war debt after 1945.

Financial repression is most successful in liquidating debts when accompanied by a steady dose of inflation, and it can be considered a form of taxation.

Reinhart and Sbrancia characterise financial repression as consisting of the following key elements:

The Indian financial market was a leading example for so-called "financial repression" (Mackinnon and Shaw).

He warns about the negative effects of financial repression on future bond prices and advocates laddered bond portfolios vs. bond funds.

Their results showed that financial repression exceeded 2% of GDP for seven countries, and greater than 3% for five countries.

In the case of Mexico financial repression was 6% of GDP, or 40% of tax revenue.

Proponents of the ideology hold that unrestricted financial flows, if redeemed from the shackles of "financial repressions", best help impoverished nations to grow.

A New Era of Cross Border Flows: A Return to Financial Repression?

We have also written about plausible solutions that involve moderately higher inflation and "financial repression" - pushing down inflation-adjusted interest rates, which effectively amounts to a tax on bondholders.

Warsh, Kevin, "The 'Financial Repression' Trap", Wall Street Journal, December 6, 2011.

The term financial repression was first introduced in 1973 by Stanford economists Edward S. Shaw and Ronald I. McKinnon.

"Capital Inflows, Financial Repression and Macroeconomic Policy in India since the Reforms," Working Papers id:1230, esocialsciences.com.

Financial Repression Redux (Reinhart, Kirkegaard, Sbrancia June 2011)

"Capital inflows, financial repression, and macroeconomic policy in India since the reforms," Oxford Review of Economic Policy, Oxford University Press, vol.

In addition, there are tight connections between the liberalisa- tion of outward flows and a fiscal question: the extent of domestic financial repression (the forced lending by households through banks to the government).

Financial repression: Government policies such as interest rate caps on government debt, financial regulations such as reserve requirements and capital controls, and barriers to entry in markets where the government owns or controls businesses.

"Interest Rate, Saving, Investment and Economic Growth under Financial Repression: The Egyptian Example", paper presented at the 2nd conference on International Finance, Philadelphia, USA, 9-11 July 1995.

"Capital Inflows, Financial Repression And Macroeconomic Policy In India Since The Reforms," Working papers 157, Centre for Development Economics, Delhi School of Economics.