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Macro-Economic Effects of Stabilisation under Financial Repression

Author

Listed:
  • Rajanendra Narayan Nag

    (St. Xavier's College, Calcutta)

  • Mallinath Mukhopadhyay

    (St. Xavier's College, Calcutta)

Abstract

The new-structuralists make a very strong claim that IMF-sponsored stabilization plans, particularly tight monetary policy and high interest rate paid on demand deposit produce stagflationary effects in a financially repressed economy. However, this proposition is highly sensitive to the choice of exchange rate regime and nature of trade-orientation of a LDC. Once we allow for exchange rate flexibility on current account as a part of the stabilization package and reckon with capital goods imports as a reflection of import-penetration in the production-structure, the new structuralist thesis of stagflation gets seriously altered.

Suggested Citation

  • Rajanendra Narayan Nag & Mallinath Mukhopadhyay, 1998. "Macro-Economic Effects of Stabilisation under Financial Repression," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 33(1), pages 1-17, January.
    • Handle: RePEc:dse:indecr:v:33:y:1998:i:1:p:1-17
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    Citations

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    Cited by:

    1. Zaki, Mokhlis Y., 2001. "IMF-Supported Stabilization Programs and their Critics: Evidence from the Recent Experience of Egypt," World Development, Elsevier, vol. 29(11), pages 1867-1883, November.
    2. Rangan Gupta & Philton Makena, 2020. "Growth Dynamics, Multiple Equilibria, and Local Indeterminacy in an Endogenous Growth Model of Money, Banking and Inflation Targeting," Economies, MDPI, vol. 8(1), pages 1-14, March.
    3. Philip Kofi Adom & William Bekoe & George Quartey & Kwaku Amakye & Charles Barnor, 2016. "Impact of Market-based Policies and External Fiscal Discipline on Ghana's Inflation," Review of Development Economics, Wiley Blackwell, vol. 20(4), pages 794-816, November.

    More about this item

    JEL classification:

    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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