Optimal Financial Repression

Olga Norkina () and Sergey Pekarski

HSE Working papers from National Research University Higher School of Economics

Abstract: Modern financial repression in advanced economies does not rely on increasing seigniorage revenue, but mostly rests upon regulatory measures to enlarge the demand for public debt that delivers extremely low or negative real interest rate. In this paper we propose the extension of the overlapping generations model to question the optimality of financial repression in the form of non-market placement of the public debt in the captive pension fund. We show that financial repression and capital income taxation are not perfect substitutes. The optimal degree of financial repression depends on the growth rate of population. Moreover, the benevolent government makes a decision to confiscate some part of the pension wealth

Keywords: financial repression; fully-funded pension system; public debt; overlapping generations. (search for similar items in EconPapers)
JEL-codes: E62 G28 H21 H55 H63 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2014
New Economics Papers: this item is included in nep-cba, nep-dge, nep-fdg and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in WP BRP Series: Economics / EC, December 2014, pages 1-23

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Persistent link: https://EconPapers.repec.org/RePEc:hig:wpaper:81/ec/2014

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