№ 8/2015

Fìnansi Ukr. 2015 (8): 31–55

MARKET OF FINANCIAL SERVICES

NAUMENKOVA Svitlana ¹, MISHCHENKO Volodymyr ²

¹Taras Shevchenko National University of Kyiv, Research ID : http://www.researcherid.com/rid/N-5604-2019
OrcID ID : https://orcid.org/000-0001-8582-6044
²Institute for Economics and Forecasting of the NAS of Ukraine
OrcID ID : https://orcid.org/0000-0002-8565-2686

The hidden public debt transfer through financial repression: the forms and tools

This paper provides a rationale for financial repressions as a combination of regulatory measures of central banks and Governments, which leads to the distortion of the mechanisms of the functioning of financial markets and financial intermediation in order to reduce the debt load and reduce the cost of servicing the public debt. The distinction in terms of financial regulation and financial repression are formulated. The assumptions and characteristic of abroad and Ukraine’s financial repression are defined. It is shown that the main cause of financial repression is fiscal policy weakness; complementarity deficiency of tools and methods for managing inflation, budget deficits and public debt. The key forms of financial repression and tools for their application are defined in this article. The authors argue that the active use of financial repression will lead to the formation of a government debt captive market, shadow markets financial actives and meaningful constraints of sources of bank resources formation and the uncontrolled withdrawal of assets outside the country will strengthen if the excessive financial pressures occur. Based on central banks' experience, the authors determine that the reducing of the national saving capacity is caused by financial repression. It might be a source of increasing financial imbalances and financial instability. The authors justify the conclusion that the mechanism of financial repression could be used for short intervals without negative consequences for the economy.

Keywords: public debt, financial repression, inflation, real interest rate, the liquidation effect.

JEL: E31, Е64, G28, H31, H63.

NAUMENKOVA S. . The hidden public debt transfer through financial repression: the forms and tools / S. . NAUMENKOVA, V. . Mishchenko // Фінанси України. - 2015. - № 8. - C. 31-55.

Article original in Ukrainian (pp. 31 - 55)

Download

Downloads :746

1. McKinnon, R. I. (1973). Money and Capital in Economic Development. Washington, D. C.: The Brookings Institution.
2. Reinhart, C., Kirkegaard, J., Sbrancia, B. (2011). Financial repression redux. Finance and Development, Vol. 48, No 2, June, 22–26. Retrieved from www.imf.org/external/pubs/ft/fandd/2011/06/Reinhart.htm.
3. Reinhart, C., Sbrancia, B. (2011). The Liquidation of Government Debt. BIS Working Papers, No 363, 53 р. Retrieved from www.bis.org/publ/work363.pdf.
4. Reinhart, C., Rogoff, K. S. (2010). Growth in a Time of Debt. American Economic Review, Vol. 100 (2), May, 573–578. Retrieved from www.aeaweb.org/articles.php?doi=10.1257/aer.100/2/573.
5. Giovannini, А., Melo М. (1993). Government Revenue from Financial Repression. The American Economic Review, Vol. 83, No 4, 953–963. Retrieved from www.jstor.org/stable/2117587.
6. Naumer, H.-J. (n.d.) Financial Repression: Shrinking Mountains of Debt. Retrieved from us.allianzgi.com/MarketingPrograms/External%20Documents/Shrinking_Mountain_of_Debt.pdf.
7. Moiseev, S. R. (2011). Denezhno-kreditnaya politika: teoriya i praktika [Monetary Policy: Theory and Practice]. Moskva: Moskovskaya finansovo-promy`shlennaya akademiya [in Russian].
8. Moiseev, S. R. (2002). Polite`konomiya finansovoj repressii [Political economy of financial repression]. Voprosy` e`konomiki [Economics Questions], № 2, 36–50, [in Russian].
9. Pekarskij, S. (2014). Finansovaya repressiya [Financial repression]. Retrieved from postnauka.ru/video/31684 [in Russian].
10. Conway, P. (2003). Financial Repression in Transition: Evidence from Ukraine. Retrieved from pconway.web.unc.edu/files/2016/03/finrepress.pdf.
11. Kravchuk, R. (2005). Polіty`ka fіnansovy`x obmezhen`: pry`klad Ukrayiny`, 1992—2000 [The policy of financial constraints: the case of Ukraine, 1992-2000]. Mіzhnarodna ekonomіchna polіty`ka [International Economic Policy], № 1 (2), 69–99. Retrieved from journals.uran.ua/jiep/article/view/27428 [in Ukrainian].
12. Pettis, М. (2013). Avoiding the Fall: China’s Economic Restructuring. Carnegie Endowment for International Piece, N. W., 172 p. Retrieved from www.imf.org/external/data.htm.
13. Checherita, C., Rother, Ph. (2010). The impact of high and growing government debt on economic growth: an empirical investigation for the Euro Area. European Central Bank Working Paper Series, No 1237. Retrieved from www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1237.pdf.
14. Feng Lu, S., Yao, Yang. (2009). The effectiveness of law, financial development, and economic growth in an economy of financial repression: evidence from China. World Development, Vol. 37, No 4, 763–777. Retrieved from www.sciencedirect.com/science/article/pii/S0305750X08003434.
15. Skry`pny`chenko, M. І. (Ed.) (2015). Modelі іdenty`fіkacіyi makroekonomіchny`x dy`sbalansіv v Ukrayinі [Models of identify macroeconomic imbalances in Ukraine]. Ky`yiv, NAN Ukrayiny`, Іnsty`tut ekonomіky` ta prohnozuvannya. Retrieved from ief.org.ua/docs/mg/Monogr_Modeli%20identyfikacii%20macroeconomichnyh%20dysbalanciv_2015.pdf [in Ukrainian].
16. Lunіna, І. O., Bulana, O. O., Frolova, N. B. (2014). Rozvy`tok derzhavny`x fіnansіv Ukrayiny` v umovax hlobalіzacіyi [The development of public finances Ukraine in the context of globalization]. Ky`yiv, NAN Ukrayiny`, Іnsty`tut ekonomіky` ta prohnozuvannya [in Ukrainian].
17. Bukovy`ns`ky`j, S. (2014). Zabezpechennya cіnovoyi stabіl`nostі і mіnіmіzacіya sy`stemny`x fіnansovy`x ry`zy`kіv [Ensuring of price stability and minimizing of systemic financial risks]. Vіsny`k Nacіonal`noho banku Ukrayiny` [Bulletin of the National Bank of Ukraine], №11, 5–13 [in Ukrainian].
18. Koval`chuk, T. T. (2014). SOS — v Ukrayinі neokolonіal`na model` valyutnoyi polіty`ky` [SOS - in Ukraine neocolonial model of monetary policy]. Ekonomіka Ukrayiny` [Ukraine economy], № 10, 4–13 [in Ukrainian].
19. Repress, then inflate. (2011). The Economist, No 7. Retrieved from www.economist.com/blogs/freeexchange/2011/07/americas-debt.
20. OECD. (2015). General government financial wealth (indicator). Retrieved from data.oecd.org/gga/general-government-financial-wealth.htm.
21. International Monetary Fund. (2001). Manual on government finance statistics. Retrieved from www.imf.org/external/pubs/ft/gfs/manual/pdf/all.pdf.
22. Basel Committee on Banking Supervision. (2013). Global systemically important banks: updated assessment methodology and the Higher loss absorbency requirement (July 2013). Retrieved from www.bis.org/publ/bcbs255.pd.
23. Basel Committee on Banking Supervision. (2008). Principles for Sound Liquidity Risk Management and Supervision. Retrieved from www.bulentsenver.com/BS_ReadingMaterials/PrinciplesForSound_LiquidityMng_bcbs144.pdf.
24. State Statistics Service of Ukraine. (n.d.) Іndeksy` spozhy`vchy`x cіn (іndeksy` іnflyacіyi) [Consumer price index (inflation index)]. Retrieved from www.ukrstat.gov.ua/ [in Ukrainian].
25. National Bank of Ukraine. (n.d.) Oblіkova stavka Nacіonal`noho banku Ukrayiny` [Discount rate of the National Bank of Ukraine]. Retrieved from www.bank.gov.ua/control/uk/publish/article?art_id=53647 &cat_id=44580 [in Ukrainian].
26. Naumenkova, S., Malyutin, O., Mishchenko, S. (2015) Transition to Inflation Targeting in Ukraine: New Tools for Monetary Policy. Bulletin of Taras Shevchenko National University of Kyiv. Series: Economics, Vol. 1 (166), 31¬¬–39.
27. Cabinet of Ministers of Ukraine. (2015) Pro zatverdzhennya planu zaxodіv na 2015 rіk іz zapobіhannya ta proty`dіyi lehalіzacіyi (vіdmy`vannyu) doxodіv, oderzhany`x zlochy`nny`m shlyaxom, fіnansuvannyu terory`zmu ta fіnansuvannyu rozpovsyudzhennya zbroyi masovoho zny`shhennya [On approval of the action plan for 2015 on prevention and counteraction to legalization (laundering) of proceeds from crime, terrorist financing and the financing of proliferation of weapons of mass destruction] (Decree № 99, March 11). Retrieved from zakon4.rada.gov.ua/laws/show/99-2015-п [in Ukrainian].
28. National Securities and Stock Market Commission. (2012). Polozhennya pro vy`mohy` do osіb, shho zdіjsnyuyut` profesіjnu dіyal`nіst` z upravlіnnya akty`vamy` іnsty`tucіjny`x іnvestorіv (dіyal`nіst` z upravlіnnya akty`vamy`), shhodo skladu ta struktury` akty`vіv nederzhavny`x pensіjny`x fondіv, yaky`my` vony` upravlyayut` [Regulation on requirements for persons engaged in professional asset management of institutional investors (asset management) about the composition and structure of private pension funds they manage] (Resolution № 582, April 26). Retrieved from zakon4.rada.gov.ua/laws/show/z0787-12 [in Ukrainian].