Digest Finance

An Analysis of the Financial Repression Index in the OECD and BRICS Countries

Vol. 22, Iss. 3, SEPTEMBER 2017

PDF  Article PDF Version

Received: 15 May 2017

Received in revised form: 15 June 2017

Accepted: 19 June 2017

Available online: 21 September 2017

Subject Heading: Financial control

JEL Classification: E5, Е58, Е61, Н27

Pages: 332-345


Akhmed Abu Bakr F.A. Moscow State Institute of International Relations (University) of Ministry of Foreign Affairs of Russian Federation, Moscow, Russian Federation Farid.abubakr88@gmail.com

Importance Considering the persistence of high public debt and low growth rates, the financial repression policy remains relevant in advanced and some emerging economies. It pursues additional fiscal revenue and reducing the debt burden by artificially lowering the real interest rate, yield on deposits and government bonds. However, it becomes even more important to quantify how those measures of monetary policy influence economic growth. Making the first attempt in this respect, it is reasonable to set up a weighted index, which would imply key aspects of such policies. The article analyzes financial repression tools in 13 countries.
Objectives I set up the financial repression index and analyze what it is composed of, determining the importance of a certain tool of monetary policy as part of the general index trends.
Methods The research employs several econometric methods, with the prevalence of the Principal Component Analysis. Statistical data were brought into compliance with analyzable criteria using the T-test formula. To trace cross-country parallels, I use a correlation matrix.
Results The financial repression index was built. I also analyze its composition per each country and identify distinctions in applying certain financial repression tools and find a group of countries with similar characteristics.
Conclusions and Relevance Most countries demonstrated a downward trend in the financial repression index. During the 2007–2009 global financial crisis and the 2014–2015 commodity price slump, the index demonstrated a spike proving that the countries resorted to financial repression tools.

Keywords: monetary policy, macroprudential regulation, financial repression index, Principal Component Analysis, public debt


  1. Giovannini A., de Melo M. Government Revenue from Financial Repression. The American Economic Review, 1993, vol. 83, no. 4, pp. 953–963. URL: http://www.nber.org/papers/w3604.pdf doi: 10.3386/w3604
  2. Reinhart C.M., Kirkegaard J.F., Sbrancia M.B. Financial Repression Redux. International Monetary Fund. Finance & Development, 2011, vol. 48, iss. 1, pp. 22–27. URL: http://www.imf.org/external/pubs/ft/fandd/2011/06/pdf/reinhart.pdf
  3. De Gregorio J. Inflation, Taxation, and Long-Run Growth. Journal of Monetary Economics, 1993, vol. 31, iss. 3, pp. 271–298. URL: https://doi.org/10.1016/0304-3932(93)90049-L
  4. Reinhart C.M. Public Debt, Monetary Policy and Financial Stability. Banque de France, Financial Stability Review, 2012, no. 16, pp. 37–48. URL: https://publications.banque-france.fr/sites/default/files/medias/documents/financial-stability-review-16_2012-04.pdf
  5. Drelichman M., Voth H.J. Debt Sustainability in Historical Perspective: The Role of Fiscal Repression. Journal of the European Economic Association, 2008, vol. 6, iss. 2-3, pp. 657–667. URL: http://www.academia.edu/19836588/DEBT_SUSTAINABILITY_IN_HISTORICAL_ PERSPECTIVE_THE_ROLE_OF_FISCAL_REPRESSION
  6. Goswami S., Gupta R. An Endogenous Growth Model of a Financially Repressed Small Open Economy. International Economic Journal, 2009, vol. 23, iss. 1, pp. 143–161. URL: https://www.deepdyve.com/lp/taylor-francis/an-endogenous-growth-model-of-a-financially-repressed-small-open-CzTyvvhQ7y
  7. Mertens K. Deposit Rate Ceilings and Monetary Transmission in the US. Journal of Monetary Economics, 2008, vol. 55, iss. 7, pp. 1290–1302.
  8. Norkina O.A., Pekarskii S.E. [Nonmarket Debt Placement As Financial Repression]. Zhurnal Novoi ekonomicheskoi assotsiatsii = Journal of the New Economic Association, 2015, no. 4, pp. 31–55. (In Russ.)
  9. Agarwala R. (CPD). Price Distortions and Growth in Developing Countries (French). Washington, D.C., The World Bank. Staff Working Paper, 1983, no. SWP 575, 92 p. URL: http://documents.worldbank.org/curated/en/621361468764405568/Price-distortions-and-growth-in-developing-countries
  10. Roubini N., Sala-i-Martin X. Financial Repression and Economic Growth. Journal of Development Economics, 1992, no. 39, iss. 1, pp. 5–30. URL: https://doi.org/10.3386/w3876
  11. McKinnon R.I. The Order of Economic Liberalization: Financial Control in the Transition to a Market Economy. Baltimore, Johns Hopkins University Press, 1993, 264 p.
  12. Ang J.B., McKibbin W.J. Financial Liberalization, Financial Sector Development and Growth: Evidence from Malaysia. Journal of Development Economics, 2007, vol. 84, iss. 1, pp. 215–233.
  13. Demetriades P.O., Luintel K.B. Financial Restraints in the South Korean Miracle. Journal of Development Economics, 2001, vol. 64, iss. 2, pp. 459–479. URL: https://doi.org/10.1016/S0304-3878(00)00146-2
  14. Golub G.H., van der Vorst H.A. Eigenvalue Computation in the 20th Century. Journal of Computational and Applied Mathematics, 2000, iss. 123, pp. 35–65. URL: https://doi.org/10.1016/S0377-0427(00)00413-1
  15. Feng S., Lu Yang Yao. The Effectiveness of Law, Financial Development, and Economic Growth in an Economy of Financial Repression: Evidence from China. World Development, 2009, vol. 37, iss. 4, pp. 763–777. URL: https://doi.org/10.1016/j.worlddev.2008.07.018
  16. Ushida M. Towards the End of Deflation in Japan? Monetary Policy under Abenomics and the Role of the Central Bank. Revue de l'OFCE, 2014, vol. 135, iss. 4, pp. 243–268. URL: http://www.cairn.info/load_pdf.php?ID_ARTICLE=REOF_135_0243
  17. Kawai M., Morgan J.P. Long-Term Issues for Fiscal Sustainability in Emerging Asia. Public Policy Review, 2013, vol. 9, no. 4, pp. 751–769. URL: http://www.mof.go.jp/english/pri/publication/pp_review/ppr023/ppr023h.pdf
  18. Ogawa K., Imai K. Why Do Commercial Banks Hold Government Bonds? The Case of Japan. Journal of the Japanese and International Economies, 2014, vol. 34, pp. 201–216. URL: https://doi.org/10.1016/j.jjie.2014.07.002
  19. Minella A., Souza-Sobrinho N. Monetary Policy Channels in Brazil through the Lens of a Semi-Structural Model. Central Bank of Brazil, Research Department. Working Paper Series, 2009, no. 181, pp. 1–57. URL: http://www.bcb.gov.br/pec/wps/ingl/wps181.pdf
  20. Hoffman A., Loeffler A. Low Interest Rate Policy and the Use of Reserve Requirements in Emerging Markets. Universität Leipzig, Wirtschaftswissenschaftliche Fakultät. Working Paper, 2013, no. 120. URL: https://www.econstor.eu/bitstream/10419/74608/1/747342504.pdf

View all articles of issue


ISSN 2311-9438 (Online)
ISSN 2073-8005 (Print)

Journal current issue

Vol. , Iss.