by Marijn A. Bolhuis (RES), Jakree Koosakul (MCM), Neil Shenai (SPR), and Jie Yang (SPR)
The paper and its contributions:
- Financial repression—using regulation to force banks to hold government debt at below-market rates—is historically important but poorly measured; this paper fills that gap
- Develops three quantity-based repression indicators from a structural portfolio choice model, exploiting the fact that banks face regulatory pressure while households do not; the gap between their portfolio behavior identifies repression
- A narrow fiscal indicator captures direct bond-holding mandates; a monetary indicator extends to central bank reserves; a consolidated measure covers both
- Builds a novel dataset and applies financial repression indicators to 18 advanced economies since 1920.
- Finds that repression peaked in WWII and Bretton Woods, declined with financial liberalization in the 1980s, and has risen steadily since the GFC. Repression is at peacetime highs.
- Argues that repression is not costless: we find a significant negative association between repression and private credit growth and investment, consistent with crowding out of productive private sector activity — making it a risk worth monitoring and a reason to pursue prudent fiscal adjustment before it becomes the path of least resistance
- Two policy implications follow: repression is a risk to monitor, not a historical curiosity. Fiscal prudence today reduces the risk of repression tomorrow. Countries that act early and prudently are less likely to bear these risks.
Relevance to the Annual Meetings audience:
- Topic is very broad and relevant to all policymakers in both AEs, EMs, and LICs. Very top of mind issue for policymakers including in Asia, where reserve managers hold considerable safe assets of highly indebted AEs.
- Highly topical for current 2026 conjuncture, which matches the historical repression template on multiple dimensions: high public debt, potentially higher-for-longer interest rate pressures, political fragmentation making sustained fiscal consolidation difficult, and elevated size of central bank balance sheets. Governments actively managing trade and, in some cases, capital flows.
- Paper is a natural bridge of analysis to emerging topics such as to stablecoins and digital money. Stablecoins and decentralized finance represent new exit options for savers, which could erode the captive creditor base that repression depends on, just as financial liberalization did in the 1980s. But the policy response to that threat is itself a frontier repression question: governments may seek to restrict stablecoins (closing the exit, as with gold ownership bans historically) or deploy CBDCs to extend captive demand beyond the traditional banking system. The paper's framework helps quantify what is at stake in those regulatory choices.
The team: Cross-departmental team (SPR, RES, MCM). Thai national co-author (Jakree Koosakul) with experience working at the Bank of Thailand. Nominated presenter Neil Shenai (SPR) has extensive public speaking experience including multiple appearances on BBC World Service radio and television; well suited to a dynamic, mixed-audience presentation. Publication status: Paper is on track for IMF Working Paper publication before the July 31, 2026 deadline.
