The consequences of ‘upward financial repression’
- 1 June 1988
- journal article
- research article
- Published by Taylor & Francis in International Review of Applied Economics
- Vol. 2 (2) , 233-249
- https://doi.org/10.1080/758530281
Abstract
Developing nations are frequently advised to raise administered financial rates above expected inflation rates in stabilization and structural adjustment programmes. In depressed or severely distorted economies, however, market-clearing real financial rates may be non-positive. In such circumstances, attempts to force financial rates above market-clearing levels may impede economic recovery and contribute to industrial and financial-system decapitalization. Moreover, policy-makers may effectively be forced to allow inflation to finance payment of excessively high rates. Where financial rates must be administered, policy-makers should aim to equilibrate financial supply and demand, with a view to maintaining financial-system profitability and safety. Policy-makers should regard sustainable positive real financial rates as indicators of a soundly functioning economy, hence as something to achieve, not to force.Keywords
This publication has 4 references indexed in Scilit:
- On the Real Effects of Inflation and Relative-Price Variability: Some Empirical EvidenceThe Review of Economics and Statistics, 1980
- Inflation and Relative Price VariabilityJournal of Political Economy, 1978
- Alternative Stabilization Policies for Less-developed EconomiesJournal of Political Economy, 1976
- Inflation, Productivity, and Relative Prices--A Statistical StudyThe Review of Economics and Statistics, 1965