NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Miguel A. Santos

Harvard Kennedy School
John F. Kennedy Street 79
Cambridge, MA 02138

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NBER Working Papers and Publications

July 2015From Financial Repression to External Distress: The Case of Venezuela
with Carmen M. Reinhart: w21333
Recent work has supported that there is a connection between the level of domestic debt level and sovereign default on external debt. We examine the potential linkages in a case study of Venezuela from 1984 to 2013. This unique example encompasses multiple financial crises, cycles of liberalization and policy reversals, and alternative exchange rate arrangements. This experience reveals a nexus among domestic debt, financial repression, and external vulnerability. Unlike foreign currency-denominated debt, debt in domestic currency may be reduced through financial repression, a tax on bondholders and savers producing negative real interest rates. Using a variety of methodologies, we estimate the magnitude of the tax from financial repression. On average, this financial repression tax (as...

Published: Carmen M. Reinhart & Miguel Angel Santos, 2016. "From Financial Repression to External Distress: The Case of Venezuela," Emerging Markets Finance and Trade, vol 52(2), pages 255-284. citation courtesy of

 
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