Recent international agreements on tax data sharing aim to facilitate residence based taxation of capital and thus mitigate tax competition. I show that residence based capital tax rates can still decline with the number of financially integrated countries when public spending and debt are used strategically. While suboptimal in the steady state, strategic policies persist during transition if ...

In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. We develop a two-sector new-Keynesian model to evaluate different inflation targeting rules in economies with financial frictions. We conclude that, in the presence of financial frictions, a welfaremaximizing central bank should adopt flexible head...

Redistributive Taxation and Personal Bankruptcy in US States Both personal bankruptcy and redistributive taxes can insure households’ consumption risk and both vary considerably across US states. We derive sufficient conditions under which more redistributive taxation makes bankruptcy exemptions less attractive both for the intratemporal insurance and for inter-temporal consumption smoothing. E...

This paper analyses the political constraints of intergenerational risk sharing. The …rst result is that the political process generally does not lead to ex ante optimal insurance. The second result is that in a second best political setting PAYG still contributes to intergenerational risk sharing. The third result is that aging increases the discrepancy between …rst-best and second-best transf...

The gains from international monetary policy cooperation are sizeable when the crossborder spillovers of shocks are significant and policymakers face a strong incentive to use monetary policy to insulate their country from these spillovers. We show that financial market arrangements play an integral role in determining these incentives. In a quantitative two-countries, two-goods model with stic...

Some Thoughts on Macroeconomic Fluctuations and the Timing of Labor Market Reform In this paper, I analyze the pros and cons of implementing structural reforms of the labor market in booms vs. recessions, in light of considerations of social efficiency, political viability, and macroeconomic fine tuning. While the optimal timing of a reform depends on the relative importance of several conflict...

We analyze how the threat of a potential future regime shift affects optimal management. We use a simple general growth model to analyze four cases that involve combinations of stock collapse versus changes in system dynamics, and exogenous versus endogenous probabilities of regime shift. Prior work has focused on stock collapse with endogenous probabilities and reaches ambiguous conclusions ab...

Yes, size actually matters. This paper models the strategic interaction between banks and the government when bailouts are possible. I analyze how imperfect common knowledge about the government’s bailout policy affects the ex-ante leverage choice for each bank. Large banks, by internalizing the effect of their size on the likelihood of being bailed out, are willing to take more leverage. In eq...

We study the role of anonymous markets in which trades cannot be monitored by the government. We adopt a Mirrlees approach to analyze economies in which agents have private information and a benevolent government controls optimal redistributive tax policy. While unrestricted access to anonymous markets reduces the set of policy instruments available to the government, it also limits the scope o...