Financial repression and external openness in an endogenous growth model

Sung Jin Kang and Yasuyuki Sawada

The Journal of International Trade & Economic Development, 2001, vol. 9, issue 4, 427-443

Abstract: An endogenous growth model has been developed that extends Sidrauski (1967), Roubini and Sala-i-Martin (1992,1995) and Lucas (1988) by combining financial development, human capital investment, and external openness. Financial development and trade liberalization are shown to increase the economic growth rate by increasing the marginal benefits of human capital investment. Expansionary governments are, however, provided with an incentive to increase the money supply growth rate, to repress the financial sector, to close its economy, and to impose a high proportional income tax rate.

Keywords: Endogenous Growth; Financial Repression; Openness; Human Capital (search for similar items in EconPapers)
Date: 2001
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DOI: 10.1080/096381900750056858

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