Optimal tax and debt policy with endogenously imperfect creditworthiness
AbstractThis paper studies the patterns of optimal tax rates and borrowing in a developing country characterized by a costly tax collection. Its access to the international credit market is determined by the efficiency of the tax system, the relative bargaining power of creditors, and the outstanding debt. Country risk modifies considerably the pattern of taxes and borrowing in recessions. The tax rate exhibits strong counter-cyclical patterns in economies operating close to the credit ceiling, whereas the tax rate exhibits very few cyclical patterns in economies operating on the elastic portion of the supply of credit, where country risk factors are absent.
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Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal The Journal of International Trade & Economic Development.
Volume (Year): 9 (2001)
Issue (Month): 4 ()
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Other versions of this item:
- Joshua Aizenman & Michael Gavin & Ricardo Hausmann, 1996. "Optimal Tax and Debt Policy with Endogenously Imperfect Creditworthiness," NBER Working Papers 5558, National Bureau of Economic Research, Inc.
- F18 - International Economics - - Trade - - - Trade and Environment
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
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