| Abstract: | This paper examines the effects of financial repression on macroeconomic performance in Yugoslavia. Financial disintermediation is examined in detail. A vector autoregression analysis of monthly macroeconomic data for 1978–1986, a period of fairly steady policies, is estimated. In a robust result, the degree of central bank selective rediscounting of credit is shown to influence output negatively, which may be interpreted as indicating that interventions in financial markets are serving to “back losers” and impose other costs on the Yugoslav economy. The economy is Also found to be highly inelastic in output and employment. The findings lend insights into the causes and effects of the recent surge in inflation. |
