Several industrialized countries impose withholding taxes on public interest accruing to nonresidents. This paper examines the international incidence of such withholding taxes by estimating to what extent these taxes raise the cost of government borrowing. It is found that the pretax interest...

The Lucas Critique provides a cautionary background for the implementation of new policies. Rational agents tend to anticipate the consequences of new policies and may adopt their behavior in ways that affect the effectiveness of policies. New financial regulation, which is moving from a...

We present a model in which flat (cycle-independent) capital requirements are undesirable because of shocks to bank capital. There is a rationale for countercyclical capital requirements that impose lower capital demands when aggregate bank capital is low. However, such capital requirements also...

The tax benefit of interest deductibility encourages debt financing, but regulatory and market constraints create dependency between bank leverage and asset risk. Using a large international sample of banks in this paper I find that banks located in high-tax countries have higher leverage and...

We estimate expected bail-in costs for an international sample of banks by comparing spreads of credit default swaps (CDS) that only differ in terms of whether they insure against the bailing in of a distressed banks’ creditors. Using these estimated bail-in costs we study bank risk taking...