Tax evasion and financial repression: a reconsideration using endogenous growth models

This paper aims at developing a theoretical model of a world economy characterized by tax evasion. It seeks to analyze whether financial repression can be explained by tax evasion.

The analysis is performed in overlapping generations dynamic general equilibrium endogenous monetary growth models.

The paper shows that higher degree of tax evasion within a country, resulting from a higher level of corruption and a lower penalty rate, yields higher degrees of financial repression.

Financial repression can be explained by tax evasion but under specific conditions.

This is the first attempt to analyze financial repression and tax evasion in an endogenous growth model.