Financial Repression and Economic Growth

59 Pages Posted: 23 Apr 2004  

Nouriel Roubini

New York University - Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER)

Xavier Sala-i-Martin

Columbia University, Graduate School of Arts and Sciences, Department of Economics

Date Written: October 1991

Abstract

We survey the literatures that study the relation between the trade regime and growth and financial development, financial repression, and growth. We analyze the relation between the trade regime, the degree of financial development and the growth performance of a large cross section of countries. The systematic finding is that there is a negative relation between trade distortions and growth. We also present some variables that capture the degree to which the financial sector is distorted. We find that financial repression has negative consequences for growth. We also find that inflation- is negatively related to growth. We interpret this relation, however, as symptomatic rather than causal. We show that once we hold constant measures of the trade regime and financial repression, the regional dummies for Latin America are no longer significant. Thus, the poor performance of the Latin American countries over the last few decades is related to the trade and financial policies pursued by their governments.

Suggested Citation

Roubini, Nouriel and Sala-i-Martin, Xavier, Financial Repression and Economic Growth (October 1991). NBER Working Paper No. w3876. Available at SSRN: https://ssrn.com/abstract=262716

Nouriel Roubini (Contact Author)

New York University - Leonard N. Stern School of Business - Department of Economics ( email )

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New York, NY 10003
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National Bureau of Economic Research (NBER)

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Francesc Xavier Sala-i-Martin

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

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New York, NY 10027
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212-854-7055 (Phone)

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