Data and Code for: Optimal Taxation with Endogenous Default under Incomplete Markets
Principal Investigator(s): View help for Principal Investigator(s) Demian Pouzo, UC Berkeley; Ignacio Presno, Board of Governors of the Federal Reserve System
Version: View help for Version V1
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| data | 04/12/2022 12:04:PM | ||
| model | 04/12/2022 12:24:PM | ||
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application/pdf | 160 KB | 04/13/2022 09:58:AM |
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application/x-tex | 11 KB | 04/13/2022 09:57:AM |
Project Citation:
Pouzo, Demian , and Presno, Ignacio. Data and Code for: Optimal Taxation with Endogenous Default under Incomplete Markets. Nashville, TN: American Economic Association [publisher], 2022. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2022-06-24. https://doi.org/10.3886/E134062V1
Project Description
Summary:
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How are the optimal tax and debt policies affected if the government can default on its debt? We address this question from a normative perspective in an economy with noncontingent government debt, domestic default and labor taxes. On one hand, default prevents the government from incurring future tax distortions associated with servicing the debt. On the other hand, default risk gives rise to endogenous credit limits that hinder the government's ability to smooth taxes. We characterize the fiscal policy and show how the option to default alters the near-unit root component of taxes in the economy with risk-free borrowing.
Scope of Project
JEL Classification:
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C60 Mathematical Methods; Programming Models; Mathematical and Simulation Modeling: General
D52 Incomplete Markets
H21 Taxation and Subsidies: Efficiency; Optimal Taxation
H30 Fiscal Policies and Behavior of Economic Agents: General
H63 National Debt; Debt Management; Sovereign Debt
C60 Mathematical Methods; Programming Models; Mathematical and Simulation Modeling: General
D52 Incomplete Markets
H21 Taxation and Subsidies: Efficiency; Optimal Taxation
H30 Fiscal Policies and Behavior of Economic Agents: General
H63 National Debt; Debt Management; Sovereign Debt
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