Open AccessHyperinflation and banks
Author(s) -
Branko Urošević,
Bosko Zikovic,
Nikola Vasiljević
Publication year - 2022
Publication title -
panoeconomicus
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.289
H-Index - 14
eISSN - 2217-2386
pISSN - 1452-595X
DOI - 10.2298/pan2202283u
Subject(s) - financial repression , hyperinflation , financial crisis , balance sheet , economics , circulation (fluid dynamics) , monetary economics , financial system , interest rate , sanctions , serbian , business , finance , political science , macroeconomics , monetary policy , linguistics , philosophy , physics , law , thermodynamics
In this paper we consider a triangular inter-dependence between hyperinflation, financial repression, and the financial crisis in FRY in the 1990s. When all three vertices of the triangle are present, the crisis propagates and is amplified along its edges. We focus, especially, on the less studied link between the financial crisis and financial repression in FRY. Setting administrative limits on interest rates under conditions of hyperinflation leads to deeply negative real interest rates. The situation in FRY was further aggravated by credit allocation to privileged participants. Under such circumstances, all dinar components of bank balance sheets quickly became worthless, credit activities of banks died down and real quantities of dinars in circulation became negligible. The situation improved only after the removal of the outside repression (i.e. removal of sanctions), reorganization of the entire financial sector and the entrance of foreign banks into the Serbian market at the beginning of 2000s.