Financial Crises, Debt Volatility and Optimal Taxes

Borradores de Economia
Número: 
839
Publicado: 
Clasificación JEL: 
F34, F41, H21
Palabras clave: 
Financial Crisis, capital controls, Debt Shocks, Optimal Tax

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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