From Fiscal Deadlock to Financial Repression: Anatomy of a Fall

Olivier Jeanne

No 33395, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Financial repression can be used to avoid a government default when fiscal policy is constrained. We present a model showing that optimal financial repression progresses through successive stages with increasing levels of distortion. Data from advanced economies suggest that the initial stage of financial repression typically begins when government debt exceeds 100% to 120% of GDP. Moreover, Japan’s experience suggests that countries such as the U.S. have significant leeway before resorting to the most distortive forms of financial repression.

JEL-codes: E58 E59 E6 E62 F38 G01 G28 (search for similar items in EconPapers)
Date: 2025-01
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