Modeling an economy with financial repression is a pretty hard task and needs some non-standard tricks. In fact, standard economic theory suggests that real interest rates can never be smaller than the rate of return on capital since at that point demand for credit would be infinite. That is not what happens in reality because the government not only sets the interest rate but also the supply of credit in the economy. Some people are willing to pay more to get credit, but who cares? The only person I know of who has been working on this is Edward Buffie at Indiana University. In his model, interest rates are given exogenously, and the financial sector explicitly modeled to take into consideration seniorage. Even though people like Blanchard think that macroeconomics does not even exist when applied to developing countries, I reckon that it is pretty interesting to see how concepts that are taught in any macro course and that students take as given and reasonable are reasonable only because Western economic agents and governments think that way, but there is no reason to have an economy that works with other paradigms. Maybe it is not efficient but in the end it all depends on one’s loss function, right?