@techreport{045ab049f4e4428e84951305dbe2a952,
title = "Managing Credit Booms and Busts: A Pigouvian Taxation Approach",
abstract = "We study a dynamic model in which the interaction between debt ac- cumulation and asset prices magni es credit booms and busts. We find that borrowers do not internalize these feedback e¤ects and therefore suf- fer from excessively large booms and busts in both credit flows and asset prices. We show that a Pigouvian tax on borrowing may induce borrowers to internalize these externalities and increase welfare. We calibrate the model by reference to (i) the US small and medium-sized enterprise sector and (ii) the household sector, and nd the optimal tax to be countercycli- cal in both cases, dropping to zero in busts and rising to approximately half a percentage point of the amount of debt outstanding during booms.",
keywords = "boom-bust cycles, financial crises, systemic externalities, macro-prudential regulation, precautionary savings",
author = "O. Jeanne and A. Korinek",
note = "This is also CentER Discussion Paper 2010-108S Pagination: 36",
year = "2010",
language = "English",
volume = "2010-27S",
series = "EBC Discussion Paper",
publisher = "EBC",
type = "WorkingPaper",
institution = "EBC",
}