Gupta, Rangan2012-11-022012-11-022011-03Gupta, R 2011, 'Currency substitution and financial repression', International Economic Journal, vol. 25, no. 1, pp.47-61.1016-8737 (print)1743-517x (online)10.1080/10168731003753875http://hdl.handle.net/2263/20346In this paper, we use a general equilibrium overlapping generations monetary endogenous growth model of a small open economy, to analyze whether ¯nancial repression, measured via the \high" mandatory reserve-deposit requirements of ¯nancial intermediaries, is an optimal response of a consolidated government following an increase in the degree of currency substitution. We ¯nd that higher currency substitution can yield higher reserve requirements, but, the result depends crucially on how the consumer weighs money in the utility function relative to domestic and foreign consumptions, and also the size of the government.en© Taylor & Francis. This is an electronic version of an article published in International Economic Journal, vol. 25, no. 1, pp. 47-61, March 2011. International Economic Journal is available online at: http://www.tandfonline.com/loi/riej20.Currency substitutionEndogenous growth modelsFinancial repressionSmall open economyPublic financePostprint Article