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Capital controls, collection costs and domestic public debt

  • Aizenman, Joshua
  • Guidotti, Pablo E.

The implications of a large public debt for the implementation of capital controls for an economy where tax revenue collection is costly are examined. Conditions are analyzed under which policymakers will resort to capital controls to reduce the cost of recycling domestic public debt. The linkages between a costly tax collection mechanism, capital controls, am domestic government debt are explored in terms of a two-period m:x1el of optimal taxation. Numerical simulations are provided to illustrate haw capital controls are linked to different domestic public debt levels am to different degrees of efficiency in tax-revenue collection.

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File URL: http://www.sciencedirect.com/science/article/pii/0261-5606(94)90023-X
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Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 13 (1994)
Issue (Month): 1 (February)
Pages: 41-54

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Handle: RePEc:eee:jimfin:v:13:y:1994:i:1:p:41-54
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30443

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  1. Alberto Alesina & Guido Tabellini, 1988. "External Debt, Capital Flight and Political Risk," NBER Working Papers 2610, National Bureau of Economic Research, Inc.
  2. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-71, October.
  3. Carlos A. Végh & Pablo E. Guidotti, 1990. "Optimal Taxation Policies in the EMS: A Two-Country Model of Public Finance," IMF Staff Papers, Palgrave Macmillan, vol. 37(2), pages 311-337, June.
  4. Joshua Aizenman, 1983. "Government Size, Optimal Inflation Tax, and Tax Collection Costs," Eastern Economic Journal, Eastern Economic Association, vol. 9(2), pages 103-105, Apr-Jun.
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