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Macroprudential tax on debt
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Resumo(s)
With the aim of testing macroprudential policies’ effectiveness, this research models a
rich and open economy hit by future news shocks about fundamentals and regime switches
in global liquidity. Agents take excessive debt to finance current consumption, making the
economy more vulnerable to financial crises. Quantitative findings of the simulation shows
that a tax on debt, optimally set by a social planner, increases total welfare and decreases
the probability and the magnitude of financial crisis. However, it is shown that if news
precision increases too much, a tax on debt may be even deleterious because it reduces
economic growth.
Descrição
Palavras-chave
macroprudential policy News shocks Fisherian debt effect