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Financial Liberalization and Inflationary Dynamics

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Author Info
Rangan Gupta (University of Connecticut and University of Pretoria)

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Abstract

The paper analyzes the effects of financial liberalization on inflation. We develop a monetary and endogenous growth, dynamic general equilibrium model with financial intermediaries 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 a positive inflation-financial repression relationship irrespective of the the specification of preferences. But the strength of the relationship obtained from the model is found to be much smaller in size than the corresponding empirical estimates.

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File URL: http://www.econ.uconn.edu/working/2005-31.pdf
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Publisher Info
Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2005-31.

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Length: 26 pages
Date of creation: Jul 2005
Date of revision:
Handle: RePEc:uct:uconnp:2005-31

Note: This is a revised version of the second chapter of my dissertation at the University of Connecticut. I am particularly grateful to my major advisor Christian Zimmermann for many helpful comments and discussions. All remaining errors are mine.
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Postal: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063
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Web page: http://www.econ.uconn.edu/
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Related research
Keywords: Inflation; Financial Markets and the Macroeconomy;

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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

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Joseph H. Haslag, 1995. "Monetary policy, banking, and growth," Working Papers 95-15, Federal Reserve Bank of Dallas. [Downloadable!]
    Other versions:
  2. Correia, Isabel & Neves, Joao C. & Rebelo, Sergio, 1995. "Business cycles in a small open economy," European Economic Review, Elsevier, vol. 39(6), pages 1089-1113, June. [Downloadable!] (restricted)
    Other versions:
  3. Marco Espinosa & Chong K. Yip, 1996. "An endogenous growth model of money, banking, and financial repression," Working Paper 96-4, Federal Reserve Bank of Atlanta. [Downloadable!]
  4. Bacchetta, Philippe & Caminal, Ramon, 1992. "Optimal seigniorage and financial liberalization," Journal of International Money and Finance, Elsevier, vol. 11(6), pages 518-538, December. [Downloadable!] (restricted)
  5. Roubini, Nouriel & Sala-i-Martin, Xavier, 1992. "Financial repression and economic growth," Journal of Development Economics, Elsevier, vol. 39(1), pages 5-30, July. [Downloadable!] (restricted)
    Other versions:
  6. Joseph H. Haslag & Eric R. Young, 1998. "Money Creation, Reserve Requirements, and Seigniorage," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(3), pages 677-698, July. [Downloadable!] (restricted)
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  7. Haslag, Joseph H. & Hein, Scott E., 1995. "Does it matter how monetary policy is implemented?," Journal of Monetary Economics, Elsevier, vol. 35(2), pages 359-386, April. [Downloadable!] (restricted)
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  8. V.V. Chari & Larry E. Jones & Rodolfo E. Manuelli, 1995. "The growth effects of monetary policy," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 18-32. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rangan Gupta, 2004. "Costly State Monitoring and Reserve Requirements," Working papers 2004-33, University of Connecticut, Department of Economics, revised Jul 2005. [Downloadable!]
  2. Rangan Gupta, 2005. "A Generic Model of Financial Repression," Working papers 2005-20, University of Connecticut, Department of Economics, revised Jul 2005. [Downloadable!]
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This page was last updated on 2009-11-24.

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