Financial repression policy: Latin America and Spain’s lessons for Russia

Abstract

Global financial crisis that in 2008 struck the economy and revealed many structural problems for the first time after the Great Recession had developed countries with high debt level at its core. The world’s richest economies such as Spain, Italy, Portugal, United States, the UK and Japan found themselves at the brink of default. Meanwhile emerging markets remain a volatile area with high fluctuations in portfolio investment. Lower economic growth rate in Argentina, Chile, Colombia, Brazil or México caused by a slump in commodity prices created a hole in national budgets. Therefore, within a framework of nonconventional monetary policy both developed and emerging nations resorted to measures of financial repression between 2009 and 2014 to alleviate public debt problem and generate additional revenue for the government. However, recent studies dedicated to the phenomenon ambiguously assess the role of financial repression in achieving more efficient results of internal regulation. This article contributes to further quantitative analysis of a joint effect of financial repression measures. The purpose of the study is to identify macroeconomic consequences of the policy on the growth rate of GDP and its components.

Keywords

• financial repression
• negative interest rates
• sovereign debt
• nonconventional monetary policy
• economic growth
• regression analysis