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Financial Crises, Debt Volatility and Optimal Taxes

Julián Andrés
Parra-Polanía
Carmiña Ofelia
Vargas-Riaño
Viernes, 8 Agosto 2014

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 increa