Financial repression and subsidies: Capital investment in Russia, December 1998 to December 2005.

摘要

The purpose of this dissertation is to assess potential systemic distortions on investment from governmental actions of (1) financial repression, and (2) subsidies in Russia. The extent to which the Russian government engages in policies that, in turn, stifle investments by firms and other market participants is explored using six individual proxies (real interest rates, reserve ratio, liquidity, private borrowing, bank lending, and stock market valuation), which are components of the Beim and Calomiris financial repression index. Then, subsidy based distortions, theorized in the work of Bernstam and Rabushka are examined using the results produced by the financial repression study.; Using datasets on both aggregate and firm-level investments in Russia?s economy, investment is shown to have a consistently negative association with an increase in the reserve requirement for both aggregate and large firm investments. Additionally, and specific to Russian large firms, the data show liquidity and bank lending are inversely related to capital investment changes. This last result is consistent with the existence of a subsidy system in Russia producing additional distortions to those created by the governmental use of financial repression.; The principal objective of banking in any country should be to provide economic liquidity and investment intermediation. However, in countries where the banks are state controlled and financial repression is the norm, this objective becomes secondary to satisfying state budgetary and political goals. This appears to be the case in Russia. Moreover, the effects of financial repression are magnified by a subsidy system largely controlled by the country's largest firms. Not surprisingly, there is strong evidence of systemic distortions on investments. The extent to which investments in Russia are influenced by these effects are highlighted through comparisons with firms in the United States.; While this research work is specific to Russia, its implications are not. This examination of financial repression produced distortions addresses an ongoing concern for many countries, firms, and governmental institutions around the world. Advisors responsible for designing policy to enhance global economic growth have an interest in determining the governmental actions that hamper investment. In many nations, primarily those which are underdeveloped or in transition, governments use repressed domestic financial systems to fund the state at the expense of private enterprise development.