Financial Liberalization with Productive Public Expenditure and A Curb Market
AbstractThis paper develops a monetary endogenous growth model of a financially repressed economy, characterized by an Unofficial Financial Market and productive public expenditure, and, in turn, analyzes the effects of financial liberalization on the rate of growth and inflation. Following the current trend in the literature the size of obligatory cash reserve requirement held by the official financial intermediaries is used as the metric for financial repression. Results indicate that financial liberalization, or in other words, lowering of the reserve requirement, is inflationary and growth-reducing. From a policy perspective, the analysis suggest that in an economy characterized by productive public expenditure, if the government ends up repressing the financial sector to a degree where curb market emerges, financial liberalization is not the desired choice of policy and, hence, policy makers should proceed with caution if low inflation and high growth are the major objectives.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by University of Pretoria, Department of Economics in its series Working Papers with number 200601.
Length: 21 pages
Date of creation: Jan 2006
Date of revision:
Financial Repression; Growth and Inflation; Unofficial Financial Markets; Monetary Policy;
Find related papers by JEL classification:
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
- 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
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rangan Gupta).
If references are entirely missing, you can add them using this form.