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Financial Repression, Bank Deposits, Real Assets and Black Money

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  • Gurbachan Singh

    (Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi)

Abstract

Consider real assets and bank deposits. If returns on deposits improve due to reduction in financial repression, then investment in real assets can fall. However, if role of black money in real asset (secondary) market falls, then investment in the primary market can rise. So financial development will occur if the effect of reduction in financial repression is stronger than that of reduction of black money. This is shown in a model, with forced sales (due to liquidity shock), and strategic sales of real assets (under asymmetric information). Under some conditions, price is irrelevant for strategic trades.

Suggested Citation

  • Gurbachan Singh, "undated". "Financial Repression, Bank Deposits, Real Assets and Black Money," Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi Discussion Papers 09-05, Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi, India.
    • Handle: RePEc:ind:citdwp:09-05
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    File URL: https://www.jnu.ac.in/sites/default/files/Financial_Repression.pdf
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    References listed on IDEAS

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    1. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 24(Win), pages 14-23.
    2. Edward L. Glaeser & Joseph Gyourko & Raven E. Saks, 2005. "Why Have Housing Prices Gone Up?," American Economic Review, American Economic Association, vol. 95(2), pages 329-333, May.
    3. Gurbachan Singh, 2005. "Real assets, financial assets, liquidity and the lemon problem," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(4), pages 731-757, October.
    4. Gorton, Gary & Pennacchi, George, 1990. "Financial Intermediaries and Liquidity Creation," Journal of Finance, American Finance Association, vol. 45(1), pages 49-71, March.
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    Cited by:

    1. Saha, Sarani & Roy, Poulomi & Kar, Saibal, 2014. "Public and private sector jobs, unreported income and consumption gap in India: Evidence from micro-data," The North American Journal of Economics and Finance, Elsevier, vol. 29(C), pages 285-300.

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