part of the Bank Regulation and Supervision Survey. We use the latest available data (World Bank, 2019) and expect a negative association with our measure of interest rate repression, given that a higher value of the index of legal requirements indicates greater entry barriers.

- **Excessive reserve requirements** : Governments may impose excessively high reserve requirements, beyond what can be reasonably expected for prudential purposes, and reserves may not be remunerated at market rates of return. Excessive reserve requirements are not directly observable, however. We measure reserve requirements using the Reserve Requirement Dataset (Federico et al., 2014), who provide a database of various reserve requirements (by type of currency, products, etc.) for 65 countries updated to 2019. We take the average of reserve requirements, which are expressed as a percentage of the instrument targeted. We expect that higher values of reserve requirements are positively associated with higher interest rate repression hence we expect a negative sign on the coefficients of correlation.

Pairwise correlations confirm that IRCs may in fact be a component of a wider financial repression policy toolkit. Table 7 presents the pairwise correlation coefficients among the gap between actual lending rates and legal ceilings, our bindingness measure for lending rate caps, and our proxies for other common financial repression policies along with their statistical significance. Pairwise correlations suggest that the relative bindingness of lending ceilings is associated with a higher share of state-owned commercial banks, which governments can use to direct credit, and more stringent _de jure_ capital controls, which can be used to influence size and composition of capital flows. Correlations become stronger, including for other proxies of financial repression (albeit not significant), when lending ceilings that are determined relative to a market benchmark are excluded from the sample.

**Table 7. Correlation Between Lending IRC Bindingness and Other Financial Repression Policies**

||Full sampl<br>ρ|e<br>N|Excl. relative<br>ceilings<br>ρ|(mkt)<br> <br>N|
|---|---|---|---|---|
|State ownership of banks|-0.284*|42|-0.393**|31|
|Capital account restrictions|0.305**|45|0.377**|33|
|Entry into banking requirements|0.002|42|0.032|30|
|Excessive reserve requirements|-0.082|19|-0.403|12|
|Significance at ***1%, **5% and *10%.|||||

# **IV. Concluding Remarks**

In this paper we present a new database on IRCs in 108 countries, which account for 88 percent of global GDP. There are signs of a resurgence in financial repression policies around the world, which may be exacerbated by the Covid-19 crisis. While some measures may turn out to be temporary, others may become permanent. Understanding their unfolding is therefore important for policy makers concerned with minimizing the associated costs. This paper represents a step towards that goal. Building on a survey of financial sector authorities and bankers’ associations conducted during 2019 in World Bank Group member countries, this paper documents a key form of financial repression: IRCs, including their origins, the legal framework and their intended objectives. The data collected through the survey are then used to provide a preliminary estimation of the degree of bindingness of IRCs and to calculate pairwise correlations with other financial repression policies.

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