The impact of financial repression on interest rate spreads in Venezuela

This paper empirically examines the effect of financial repression on interest rates spreads in Venezuela. In order to have a measure of financial repression, we built an index that captures the opportunity cost of regulatory restrictions on banking operations, such reserve requirements, mandatory lending programs, and the cost of financial transactions taxes. After controlling for other bank-level and systemic determinants, results of panel regressions suggest that there is a statistically significant positive correlation between the overall index of financial repression and interest rate spreads.