EconPapers    
Economics at your fingertips  
 

Financial crises, debt volatility and optimal taxes

Julián Parra-Polanía () and Carmina Vargas ()

BORRADORES DE ECONOMIA from BANCO DE LA REPÚBLICA

Abstract: We study financial crises in a small open production economy subject to credit constraint and uncertainty on the value of debt repayments. We find that the possibility of reducing the severity of future crises encourages the central planner (CP) to increase both the crisis frequency and current debt. The CP equilibrium can be implemented by a macro-prudential tax on debt and, only during crises, subsidies on consumption and a tax on non-tradable labor. The welfare gain of implementing such equilibrium is small for the baseline scenario but very sensitive to changes in debt volatility and the economy’s degree of openness.

Keywords: Financial crisis; capital controls; debt shocks; optimal tax. (search for similar items in EconPapers)
JEL-codes: F34 F41 H21 (search for similar items in EconPapers)
Pages: 14
Date: 2014-08-13
New Economics Papers: this item is included in nep-cba, nep-dge, nep-opm and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.banrep.gov.co/sites/default/files/publicaciones/archivos/be_839.pdf
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://www.banrep.gov.co/sites/default/files/publicaciones/archivos/be_839.pdf [301 Moved Permanently]--> https://www.banrep.gov.co/sites/default/files/publicaciones/archivos/be_839.pdf)

Related works:
Working Paper: Financial crises, debt volatility and optimal taxes (2014) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:col:000094:012027

Access Statistics for this paper

More papers in BORRADORES DE ECONOMIA from BANCO DE LA REPÚBLICA
Bibliographic data for series maintained by Clorith Angélica Bahos Olivera ().

 
Page updated 2022-06-23
Handle: RePEc:col:000094:012027