FINANCIAL REPRESSION AND STRUCTURAL IMBALANCES
Anders Johansson and
Xun Wang ()
Additional contact information
Xun Wang: China Economic Research Center, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
No 2011-19, Working Paper Series from China Economic Research Center, Stockholm School of Economics
This paper analyzes the relationship between financial repression and structural change. We present a simple theoretical model of structural transformation in which the impact of financial repression on unbalanced growth is studied. Governments may choose to repress the financial sector to allow for the development of the industry sector while inhibiting growth in the domestic service sector. When investigating the predictions of our model using data for a panel of countries, we find that financial repression have a significant negative effect on structural transformation. In countries with higher levels of financial repression, the industry sector is developed rapidly while the service sector is held back. The results are robust to different country sample compositions, alternative measures of sectoral structure, and different measures of financial repression. The analysis suggests that financial repression is an important driver of structural imbalances, especially in countries with heavy state intervention and where the government strongly favors industrial expansion. Our findings have policy implications for governments that are experiencing rapid economic transformation and that are using financial repression to achieve a long-run industrial output growth.
Keywords: Financial repression; Structural change; Structural transformation; Economic development (search for similar items in EconPapers)
JEL-codes: G18 L52 O16 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
Working Paper: Financial Repression and Structural Imbalances (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:hhs:hacerc:2011-019
Access Statistics for this paper
More papers in Working Paper Series from China Economic Research Center, Stockholm School of Economics
Address: China Economic Research Center, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Contact information at EDIRC.
Series data maintained by Malin Nilsson (). This e-mail address is bad, please contact .