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Seminarios académicos y conferencias

Emilio Espino, Universidad Torcuato Di Tella

Corporate Debt and Capital Controls

Coautor: Constantino Hevia, Universidad Torcuato Di Tella

10 Agosto 2017 - 17:00 hrs.

Sala 209, Facultad de Ciencias Económicas y Administrativas UC

  • This paper analyses an alternative setting with risk of default in which decisions of households and firms on domestic and international borrowing and lending are separated. We study an economy in which only firms can participate in international financial markets as well as in domestic credit markets. Default decision are then taken by firms (not the government) which will repay its debt only as the value of the firm integrated to international capital markets is higher than its value of reverting to autarky at some cost. We show that this alternative setting is isomorphic to one in which default decisions are taken by households by means of a fictitious government with access to international credit markets. We derive an optimal financial-dividend policy of the firms that decentralize constrained efficient allocations in a framework in which firms can issued corporate bonds of different maturities. Then, we investigate as the implementation of capital controls by means of quantitative restriction or linear taxes on corporate debt emissions can provide the right set of incentives to firms to decentralize constrained efficient allocations. That is, we ask how this class of model with risk of default can rationalize macro-prudential policies. Finally, we quantitatively investigate some properties of optimal capital controls in two dimensions. First, we ask how optimal taxes must be conducted over the business cycle Then, we study how optimal taxes must be set on debt of different maturities