Monetary unions might benefit from taxing external debt – DNB paper

Policy would reduce adverse effects of shocks to risk premia on sovereign debt, researchers find


Countries in monetary unions should consider imposing a counter-cyclical tax on external debt, a working paper published by the Netherlands Bank argues.

In Should developed economies manage international capital flows? An empirical and welfare analysis, Dennis Bonam, Gavin Goy and Emmanuel de Veirman investigate the macroeconomic effects of shocks to the risk premia on sovereign debt.

The authors apply a Bayesian vector autoregression model to see how these risk premium shocks affect a panel

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