DP489 | Government Revenue from Financial Repression

Author(s)

Publication Date

01/01/1991

JEL Code(s)

Keyword(s)

Programme Area(s)

Network(s)

Abstract

This paper analyses, from a public-finance perspective, the theoretical underpinnings and the empirical relevance of the phenomenon of financial repression. The analysis explicitly accounts for the interaction between capital controls and financial repression. The proposed empirical estimate of the revenue from financial repression is based on the difference between the domestic and the foreign cost of borrowing of the government. The correlations of the revenue from financial repression with inflation, exchange rates and per-capita income are discussed.