Financial Frictions and Stimulative Effects of Temporary Corporate Tax Cuts /

Financial Frictions and Stimulative Effects of Temporary Corporate Tax Cuts /

This paper uses an industry equilibrium model where some firms are financially constrained to quantify the effects of a transitory corporate tax cut funded by a future tax increase on the U.S. economy. It finds that by increasing current cash-flows tax cuts alleviate financing frictions, hereby stim...

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Bibliographic Details
Main Author: Gbohoui, William
Other Authors: Castro, Rui
Format: Journal
Language:English
Published: Washington, D.C. : International Monetary Fund, 2019.
Series:IMF Working Papers; Working Paper ; No. 2019/097
Subjects:
Foreign Exchange
Informal Economy
Underground Econom
Online Access:Full text available on IMF
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100 1 |a Gbohoui, William. 
245 1 0 |a Financial Frictions and Stimulative Effects of Temporary Corporate Tax Cuts /  |c William Gbohoui, Rui Castro. 
264 1 |a Washington, D.C. :  |b International Monetary Fund,  |c 2019. 
300 |a 1 online resource (39 pages) 
490 1 |a IMF Working Papers 
500 |a <strong>Off-Campus Access:</strong> No User ID or Password Required 
500 |a <strong>On-Campus Access:</strong> No User ID or Password Required 
506 |a Electronic access restricted to authorized BRAC University faculty, staff and students 
520 3 |a This paper uses an industry equilibrium model where some firms are financially constrained to quantify the effects of a transitory corporate tax cut funded by a future tax increase on the U.S. economy. It finds that by increasing current cash-flows tax cuts alleviate financing frictions, hereby stimulating current investment. Per dollar of tax stimulus, aggregate investment increases by 26 cents on impact, and aggregate output by 3.5 cents. The average effect masks heterogeneity: multipliers are close to 1 for constrained firms, especially new entrants, and negative for larger and unconstrained firms. The output effects extend well past the period the policy is reversed, leading to a cumulative multiplier of 7.2 cents. Multipliers are significantly larger when controlling for the investment crowding-out effect among unconstrained firms. 
538 |a Mode of access: Internet 
650 7 |a Foreign Exchange  |2 imf 
650 7 |a Informal Economy  |2 imf 
650 7 |a Underground Econom  |2 imf 
700 1 |a Castro, Rui. 
830 0 |a IMF Working Papers; Working Paper ;  |v No. 2019/097 
856 4 0 |z Full text available on IMF  |u http://elibrary.imf.org/view/journals/001/2019/097/001.2019.issue-097-en.xml  |z IMF e-Library 

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