 An Endogenous Growth Model of a Financially Repressed Small Open EconomySamrat Goswami () and Rangan Gupta No 200616, Working Papers from University of Pretoria, Department of Economics Abstract: The paper develops a monetary endogenous growth model of a financially repressed small open economy, characterized by curb markets, capital mobility, transaction costs in domestic and for- eign capital markets, and a flexible exchange rate system, to analyze the impact of financial liberalization– interest rate deregulation and lower multiple reserve requirements, on growth and inflation. When the model is calibrated to match world figures, we find that interest rate deregulation enhances growth and reduces inflation in steady-state. For relatively smaller transaction costs in the curb market, the above result is, however, reversed. Under such circumstances, lowering the transaction costs in the foreign capital market tends to restore the growth-enhancing (inflation- reducing) capabilities of interest rate deregulation. Lower reserve requirements, though, always ensures lower (higher) steady-state inflation (growth). Keywords: Financial Repression; Growth and Inflation; Unofficial Financial Markets; Monetary Policy (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:200616 Access Statistics for this paper More papers in Working Papers from University of Pretoria, Department of Economics Contact information at EDIRC. |
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