Arbeitspapier
Optimal fiscal policy and private sector borrowing constraints
When the transmission channel between savers and borrowing firms is disturbed, firms may find themselves borrowing-constrained. I study the optimal fiscal policy response to a tightening borrowing constraint in a simple two-period model. I find that it is not optimal to subsidize firms, although this would relax the constraint and help firms directly. Instead, the optimal response exploits the distortion caused by the borrowing constraint and reduces existing tax distortions. This result is robust to when endogenous government spending and investment are part of the government's set of instruments.
- Sprache
-
Englisch
- Erschienen in
-
Series: Discussion Papers ; No. 18-22
- Klassifikation
-
Wirtschaft
Fiscal Policy
Taxation and Subsidies: Efficiency; Optimal Taxation
- Thema
-
Optimal fiscal policy
borrowing constraints
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Myohl, Christian
- Ereignis
-
Veröffentlichung
- (wer)
-
University of Bern, Department of Economics
- (wo)
-
Bern
- (wann)
-
2018
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Myohl, Christian
- University of Bern, Department of Economics
Entstanden
- 2018
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