This paper analyzes prudential controls on capital flows to emerging markets from the perspective of a Pigouvian tax that addresses externalities associated with the deleveraging cycle. It presents a model in which restricting capital inflows during boom times reduces the potential outflows...

We study a dynamic model in which the interaction between debt accumulation and asset prices magnifies credit booms and busts. We find that borrowers do not internalize these feedback effects and therefore suffer from excessively large booms and busts in both credit flows and asset prices. We...

We study the interplay of optimal ex-ante (macroprudential) and ex-post (monetary or fiscal stimulus) measures to respond to systemic financial crises in a tractable model of fire sales. We find that it is generally optimal to use both, rejecting the Greenspan doctrine to only intervene ex post....