Ronald McKinnon, 1935 – 2014: Ronald McKinnon has died

Ronald McKinnon, a prolific and pioneering international economist, died today of complications from a fall he suffered at San Francisco’s airport 12 days ago. The news come from John Shoven at Stanford University, where Mr McKinnon had been a professor since 1961.McKinnon wrote extensively over his career about exchange rates, finance, economic development and monetary systems. But he was best known for developing the theory of “financial repression” along with his mentor, Edward Shaw, in the early 1970s. Originally aimed at explaining disparities in economic development, the term has come back in vogue in recent years to describe many of the policy responses to the financial crisis and ensuing recession.In the early 1970s, development economists thought that a lack of capital was the primary impediment to economic development, and development strategies were heavily premised on boosting the capital stock through government financed investment and foreign aid. Mr McKinnon instead focused on the maturity of the domestic financial system. In many countries, banks were forced to hold extensive reserves (often in government bonds), cap the interest rates paid on deposits or charged on loans, or direct credit to favored sectors. Sometimes, this was meant to help particular parts of the economy. Often, it was simply a way to make it easier for the government to fund its budget …

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