The Financial Repression†Liberalization Debate: Taking Stock, Looking For A Synthesis

Financial repression and liberalization became the object of fierce debates between academics and policy makers since the early 1970s. As of the late 1980s, financial liberalization became also part of the ‘Structural Adjustment Programs’ sponsored by the International Monetary Fund and the World Bank. However, the literature on financial repression and liberalization remains controversial on its theoretical conclusions and policy implications. Given its importance for both the theory and policy of economic development and growth, this paper looks for a possible synthesis. After reviewing the theoretical contributions and empirical studies under the headings of the McKinnon–Shaw and new structuralists models, the survey concludes that a new synthesis might be found in the Post†Keynesian attempt to take an institutional perspective within a globalised financial and economic environment.