Capital controls, collection costs and domestic public debt

Joshua Aizenman, Pablo E. Guidotti

Research output: Contribution to journalArticlepeer-review

13 Scopus citations

Abstract

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, and domestic government debt are explored in terms of a two-period model of optimal taxation. Numerical simulations are provided to illustrate how capital controls are linked to different domestic public debt levels and to different degrees of efficiency in tax-revenue collection.

Original languageEnglish
Pages (from-to)41-54
Number of pages14
JournalJournal of International Money and Finance
Volume13
Issue number1
DOIs
StatePublished - 1 Jan 1994
Externally publishedYes

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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