Revisiting the Inflation-Repression Relationship
AbstractThe paper analyzes the effects of financial liberalization on steady-state inflation. We develop an overlapping generations model with endogenous growth where financial intermediaries are subjected to obligatory `high' cash reserves requirement, serving as the source of financial repression. When calibrated to four Southern European semi-industrialized countries, namely Greece, Italy, Spain and Portugal, that typically had high reserve requirements, the model indicates that the sign of the inflation-financial repression relationship depends crucially on the elasticity of substitution between the cash and credit goods consumed in the economy.
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Bibliographic InfoPaper provided by University of Pretoria, Department of Economics in its series Working Papers with number 200508.
Length: 25 pages
Date of creation: Nov 2005
Date of revision:
Financial Repression; Inflation; Financial Markets and the Macroeconomy;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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