Financial Liberalization and Inflationary Dynamics: An Open Economy Analysis

Rangan Gupta

No 2005-32, Working papers from University of Connecticut, Department of Economics

Abstract: The paper analyzes the effects of financial liberalization on inflation. We develop a monetary and endogenous growth, dynamic general equilibrium model of a small open semi-industrialized economy, with financial intermediaries subjected to obligatory "high" reserve ratio, serving as the source of financial repression. When calibrated to four Southern European semi-industrialized countries, namely Greece, Italy, Spain and Portugal, that typically had high reserve requirements, the model indicates a positive inflation-financial repression relationship irrespective of the the specification of preferences. But the strength of the relationship obtained from the model is found to be much smaller in size than the corresponding empirical estimates.

Keywords: Inflation; Financial Markets and the Macroeconomy (search for similar items in EconPapers)
JEL-codes: E31 E44 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2005-07
New Economics Papers: this item is included in nep-cba, nep-dge, nep-fmk, nep-mac and nep-mon
Note: This is a revised version of the third chapter of my dissertation at the University of Connecticut. I am particularly grateful to my major advisor Christian Zimmermann for many helpful comments and discussions. All remaining errors are mine.
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Citations: View citations in EconPapers (1)

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Journal Article: Financial Liberalization and Inflationary Dynamics: An Open Economy Analysis (2007)
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