Nonmarket Debt Placement As Financial Repression

Olga Norkina () and Sergey Pekarski

Journal of the New Economic Association, 2015, vol. 28, issue 4, 31-55

Abstract: Under fiscal stress the government often turns to practice of financial repression to lower the debt service cost. Captive pension fund is one of the targets for enlarging the demand for public debt. We propose an extension of the overlapping generations model with the fully-funded pension system and fiscal policy to question the optimality of financial repression in the form of non-market placement of the public debt. Despite its negative impact on the capital accumulation, financial repression is used to finance public goods and can be an element of optimal tax policy of the benevolent government.

Keywords: financial repression; fully-funded pension system; overlapping generations; optimal taxation; government debt (search for similar items in EconPapers)
JEL-codes: E62 G28 H21 H55 H63 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:nea:journl:y:2015:i:28:p:31-55

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