Financial Repression in the Ukrainian Economy

Abstract

Throughout the 1990s, Ukraine’s macroeconomic policies posed cer- tain dangers for the coimtry. For mstance, iarge and persistent Budget deficits can lead to financial or Balance of payments crises.¹ Persistent deficits may Be interpreied By the populace as signals of iuture lax increases, greater inflation, a Coming devaiuation, or evidence of capitai flight. The public can come to view fiscal deficits as unsustamable, toucbing off an inflationary Spiral. The ränge of possible behavioral responses in the economy to mcomplete, distortionary and/or discrirrü- natoqy economic policies induced the government to undertake certain policy measures lhat would suppress the worst effects of its policy mistakes, at least for awhile.