Corporate Taxes, Leverage, and Business Cycles
João Gomes (),
Amir Yaron and
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Amir Yaron: The Wharton School, University of Pennsylvania and NBER
Brent Glover: The Wharton School, University of Pennsylvania
No 1261, 2010 Meeting Papers from Society for Economic Dynamics
the consequences of this policy for economy-wide quantities such as investment and consumption. Contrary to conventional wisdom we find that changes in tax policy have only a small effect on equilibrium levels of corporate leverage. The intuition lies in the endogenous adjustment of debt prices in equilibrium that make debt relatively more attractive and largely offset the effect of the changes in tax policy.
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Working Paper: Corporate Taxes, Leverage, and Business Cycles
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