Suchergebnisse

A common view is that bailouts of firms by governments are needed to cure inefficiencies in private markets. We propose an alternative view: even when private markets are efficient, costly bankruptcies will occur and benevolent governments without commitment will bail out firms to avoid bankruptcy costs. Bailouts then introduce inefficiencies where none had existed. Although granting the government orderly resolution powers which allow it to rewrite private contracts improves on bailout outcomes, regulating leverage and taxing size is needed to achieve the relevant constrained efficient outcome, the sustainably efficient outcome. This outcome respects governments' incentives to intervene when they lack commitment. (JEL D86, E32, G33, H81, L51)

How should countries cooperate in setting fiscal and trade policies when government expenditures must be financed with distorting taxes? We show that even if countries cannot make explicit transfers to each other, every point on the Pareto frontier is production efficient, so that international trade and capital flows should be effectively free. Trade agreements must be supplemented with fiscal policy agreements. Residence-based income tax systems have advantages over source-based systems. Taxing all household asset income at a country-specific uniform rate and setting the corporate income tax to zero yield efficient outcomes. Value-added taxes should be adjusted at the border. ; info:eu-repo/semantics/publishedVersion

We study cooperative optimal Ramsey equilibria in the open economy, addressing classic policy questions: Should restrictions be placed to free trade and capital mobility? Should capital income be taxed? Should goods be taxed based on origin or destination? What are desirable border adjustments? How can a Ramsey allocation be implemented with residence-based taxes on assets? We characterize optimal wedges and analyse alternative policy implementations. ; The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.

We offer a theoretically based narrative that attempts to account both for the formation of the European Monetary Union and the callenges it has faced. Lack of commitment to policy plays a central role in this narrative. ; The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.