1 option
Optimal taxation in the presence of bailouts / Stavros Panageas.
- Format:
- Book
- Author/Creator:
- Panageas, Stavros.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w15405.
- NBER working paper series no. w15405
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2009.
- Summary:
- The termination of a representative financial firm due to excessive leverage may lead to substantial bankruptcy costs. A government in the tradition of Ramsey (1927) may be inclined to provide transfers to the firm so as to prevent its liquidation and the associated deadweight costs. It is shown that the optimal taxation policy to finance such transfers exhibits countercyclicality and history dependence, even in a complete market. These results are in contrast with pre-existing literature on optimal fiscal policy, and are driven by the endogeneity of the transfer payments that are required to salvage the financial firm.
- Notes:
- Print version record
- October 2009.
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