The global financial crisis put paid to the notion that financial shocks are benign most of the time and revived the idea that microprudential policies needed to be paired with macroprudential policies. These policy developments have been referred to as financial repression, in part because the pre-crisis belief that markets ought to be unfettered was being challenged. While restraints on the financial sector are largely welcome, it is worth considering whether the response to the fallout from the crisis is going too far. Arguably, lost in the discussion over financial reform is the need to balance the benefits and costs of financial liberalization versus financial repression The paper highlights two weaknesses in current macroprudential policy strategies and presents some evidence of rising financial repression globally.
