Financial Repression Effect on Economic Growth: An Empirical Analysis
Subject The article considers the influence of financial repression index (FRI) on economic growth of OECD and BRICS nations through econometric models.  Objectives The purpose of this study is to build a linear model to establish the impact of FRI on GDP growth rate and examine the effect of the index on economic growth components such as consumption, investment and government spending.  Methods At the core of the research lies regression analysis of linear economic growth model. To analyze the panel of data, various static estimating model are used.  Results I have built a linear growth model and included the FRI as one of the variables. The estimators used fail to identify a significant impact of FRI on the dependent variable. Second, I construct linear models with GDP components as functions and analyze the effect of FRI on the dynamics of those. As a result, I obtain positive indications of FRI affecting negatively in the medium term the dynamics of consumption, the main driver of growth in the developed world.  Conclusions and Relevance The effect of financial repression in short and medium terms cannot necessarily be identified through GDP rate dynamics, but could be captured through the evolution of consumption. This opens a new perspective on the study of financial repression policies and its detrimental effect beyond banking and investment spheres.