The Role of Financial Separation and Interest Rates in Financial Repression by Maximum Likelihood (ML) Method in a State Space Model of Kalman Filters and Autoregressive Distributed Lag Model (ARDL)

Financial separation or to separate the nominal part of the real sector of the economy is a term derived from the financial issues that arose after the recent financial crisis. This paper examines the role of financial separation in financial repression (lack of financial development) by studying the Maximum Likelihood (ML) method in a state space model of Kalman Filters and Autoregressive Distributed Lag Model (ARDL). Risult shows that financial separation and interest rate cause a lack of financial development and financial repression either in long term or in short term, but economic development may have a decreasing impact on financial repression in long term.