Consequences of pervasive regulation in the financial system : the example of private fixed investment in Greece 1958-1985
This thesis examines the impact of pervasive regulation in the financial system on the economy, in general, and on private investment activity, in particular. A survey of the relevant literature concentrates on the issue of the arguments for, and against, financial deregulation. A macroeconomic growth model is analysed which focuses on the implications of an abrupt rise in the (private) debt service burden, following a removal of interest rate ceilings. Subsequently, selected models of investment are estimated on Greek annual data covering the period 1958-1985. The aim of the empirical work is to detect the effects of the elaborate controls imposed on the Greek banking system. (The possibility of such effects, and associated policy implications, were discussed in the preceding, theoretical, part of the thesis.) Particular effort has been expended to generate the appropriate series required for the estimations, especially those relating to the fiscal factors which influence investment behaviour. The empirical results reveal the important role of policy induced financial rationing in the determination of aggregate investment in Greece.