| ID | 167812 |
| Title Proper | Nonlinear Capital Flow Tax |
| Other Title Information | Capital Flow Management and Financial Crisis Prevention in China |
| Language | ENG |
| Author | Ju, Jiandong ; Jiandong Ju |
| Summary / Abstract (Note) | How to promote capital account liberalization while preventing financial crises is a challenging task for policymakers. This study proposes a nonlinear (progressive) capital flow tax as a solution. We first demonstrate that the collateral requirement of international borrowing can give rise to multiple equilibria and selfâfulfilling financial crises. We then show that the crisis equilibrium characterized by large exchange rate depreciation, capital flight and welfare loss can be eliminated by imposing a nonlinear (progressive) tax scheme on capital outflows with the marginal tax rate increasing with the size of individual capital outflows. The implementation of such a tax scheme in China is also discussed. |
| `In' analytical Note | China and World Economy Vol. 27, No.4; Jul-Aug 2019: p.1-28 |
| Journal Source | China and World Economy 2019-08 27, 4 |