Is financial repression a solution to reduce fiscal vulnerability? The example of France since the end of World War II

Marcel Aloy, Gilles Dufr鮯t and Anne P駵in-Feissolle
Authors registered in the RePEc Author Service: Gilles Dufrénot ()

Applied Economics, 2014, vol. 46, issue 6, 629-637

Abstract: This article contributes to the recent empirical literature on financial repression and focuses on the French case since the end of World War II. We find that the fiscal adjustment needed to lower the debt ratio has been smaller during the years of financial repression in comparison with those of liberalized financial markets. This was possible because the real interest rates were low. We conduct a counterfactual analysis to see whether the vulnerability of public finances would have been different, if, since the late 1980s, the governments had continued carrying out the same financial repression policies. We answer affirmatively showing that the cost of debt service would have been reduced.

Date: 2014
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DOI: 10.1080/00036846.2013.861586

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