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An Analysis of the Financial Repression Index in the OECD and BRICS Countries
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.
Ключевые слова: monetary policy, macroprudential regulation, financial repression index, Principal Component Analysis, public debt
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