Abstract
“In a financially repressed economy, an open capital market barely exists and is incapable of channelling funds for investment into high-priority uses” (McKinnon 1993, 102). He referred to a financially repressed economy as a closed economy where “[p]rotectionism in foreign trade, price controls and subsidies in domestic trade, and exclusive franchises for parastatals (state-owned enterprises) proliferated in all branches of industry” (1993, 1). This means that inflows of foreign financial capital may be lacking in a domestic capital market where financial repression is present. In a capital market, financial repression means financial restriction on flow of capital at a cross-border basis. Capital account control is such a kind of financial repression that confines capital account liberalization and constricts flows of financial capitals. It can make financial capital in short supply in a financially repressed economy.
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