FINANCIAL REPRESSION IN THE LDCS: A Survey of Issues and Reappraisal


This paper surveys major issues in the financial repression literature. A theoretical discussion of sources of imperfections in capital market and financial repression is presented. Important conclusions from the survey are presented for LDC policy makers in terms of impact on investment and savings variables. Based upon the former, a framework is developed in which a significant link between financially repressive policies and financial ‘looting’ is highlighted. A heuristic discussion of conditions under which financial ‘looting’ takes place is provided. The end result, and cost to the economy. is ‘paper’ investment and concentration of economic power.

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