№ 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)

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