The main motive behind financial
repression is fiscal. The government wishes to promote development but lacks
the resources to do so. In fact, financial repression is an instrument of
government revenue management. This paper examines the impact of capital
account liberalization on government's tax revenue. I test the hypothesis
empirically, using panel data on 149 countries over the period 1970-2017.
Historically, I find that the positive impact of capital account liberalization
on tax revenue is predominant in countries where the depth of the banking
sector is greater.
JEL classification numbers: O11, H2, G2.
Keywords: Tax, Capital
account Liberalization, Bank credit, Panel data.