Goswami, SamratGupta, Rangan2010-04-082010-04-082009Goswami, S & Gupta, R 2009, 'An endogenous growth model of a financially repressed small open economy', International Economic Journal, vol. 23, no. 1, pp. 143-161. [ http://www.tandf.co.uk/journals/titles/10168737.asp]1016-873710.1080/10168730802696772http://hdl.handle.net/2263/13848The paper develops a monetary endogenous growth model of a financially repressed small open economy, characterized by curb markets, capital mobility, transaction costs in domestic and foreign capital markets, and a flexible exchange rate system, to analyze the impact of financial liberalization - interest rate deregulation and lower multiple reserve requirements - on growth and inflation. When the model is calibrated to match world figures, we find that interest rate deregulation enhances growth and reduces inflation in steady-state. For relatively smaller transaction costs in the curb market, the above result is, however, reversed. Under such circumstances, lowering the transaction costs in the foreign capital market tends to restore the growth-enhancing (inflation-reducing) capabilities of interest rate deregulation. Lower reserve requirements, though, always ensures lower (higher) steady-state inflation (growth).enTaylor & Francis. This is an electronic version of an article published in International Economic Journal, vol. 23, no. 1, pp. 143-161. International Economic Journal is available online at: http://www.tandf.co.uk. This article is embargoed by the publisher until December 2011.Financial repressionGrowth and inflationUnofficial financial marketsInterest rate deregulationInflation (Finance)Economic developmentEndogenous growth (Economics)Monetary policyInterest rates -- Effect of inflation onPostprint Article