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Government Revenue from Financial Repression
Alberto Giovannini and Martha de Melo
The American Economic Review
Vol. 83, No. 4 (Sep., 1993), pp. 953-963
Published by: American Economic Association
Stable URL: http://www.jstor.org/stable/2117587
Page Count: 11
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This paper provides empirical evidence on the effects of financial repression on government finances. Financial repression is a combination of controls on international capital flows with restrictions on domestic interest rates. The result is an artificially low cost of domestic funding to governments. We estimate the government revenue from financial repression as the difference between the foreign and the domestic cost of funds, times the domestic stock of government debt. The evidence indicates that the revenue from financial repression can be quite substantial, and for several countries it is of the same order of magnitude as seigniorage.
The American Economic Review © 1993 American Economic Association