Asset bubbles play role in macro-prudential policy – IMF research
Their size may determine optimal tax levels to address credit imbalances
The size of asset bubbles may determine the level of taxation authorities should implement to address credit imbalances, says research published by the International Monetary Fund.
In Optimal Macroprudential Policy and Asset Price Bubbles, Nina Bijanovska, Lucyba Gornicka and Alexandros Vardoulakis study macro-prudential policies when credit imbalances are accompanied by an asset price bubble.
In bad times, “the presence of a bubble generates an additional pecuniary externality, which requires
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