Capital Controls, Collection Costs, and Domestic Public Debt
University of California, Santa Cruz - Department of Economics; National Bureau of Economic Research (NBER)
Pablo E. Guidotti
affiliation not provided to SSRN
NBER Working Paper No. w3443
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.
Number of Pages in PDF File: 29working papers series
Date posted: December 29, 2006
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