Financial repression,the new structuralists,and stabilization policy in semi-industrialized economies

This paper examines the short-and long-run effects of a variety of macroeconomic policies in a simple model where the curb market plays a pivotal role as the marginal supplier of loanable funds. It is found that financial liberalization may fail in the short-run and, contrary to the claims of the new structuralists, that the financial market repercussions of devaluation may be favorable. In evaluating any policy, the time horizon is critical. Short- and long-run multipliers may differ in sign in all cases, save that of a contraction in the stock of bank credit.