The literature suggests that when taking tax effects into account, debt ought to be preferable to equity. Thus, with all else being equal, levered firms are expected to show higher firm values. However, there are no uniform predictions of the size of this tax benefit from interest deductibility nor on the effect of changes in interest deductibility. We believe that the German corporate tax reform in 2008, which introduced an interest barrier, can serve as a promising "quasiexperiment" to investigate the effects from a reform of interest deductibility. A study of this reform on the basis of German financial statement data is of general interest because, first, similar interest barriers have been introduced in several countries and proposed by the OECD to fight BEPS. Second, the major characteristics of the German tax system can be regarded as representative for most European and major Asian countries. Third, single entity financial statements for German companies allows us to capture tax and capital structure details that have not been available in most prior studies. With significance at the 5% level, we find evidence that the companies that are affected by the interest barrier reduce their leverage by 4.7 percentage points more than companies that are not affected by the interest barrier. We are the first to employ a detailed matching approach to the underlying rich dataset, which enables us to overcome several limitations of previous studies. Our results imply that capital structure reactions most likely have been underestimated in previous studies. / Series: WU International Taxation Research Paper Series

Notre thèse traite des comportements d'aléa moral caractéristiques de la relation emprunteur souverain - prêteurs privés - Institutions financières internationales, et plus particulièrement de la question de l'optimalité de l'intervention du Fonds Monétaire International, lorsqu'il existe un risque de système. Cette problématique renvoie, dans la littérature, aux modèles de dette souveraine et de renégociations, aux modèles de comportement des Institutions financières internationales, et aux modèles de crises financières. Sur cette base, nous proposons deux modèles d'octroi de prêts multilatéraux. Le premier, de type Principal-Agent, comporte une conditionnalité ex post (la conditionnalité actuelle, où la vérification des conditionnalités est postérieure aux transferts, par opposition à une conditionnalité ex ante, où elle serait antérieure). Sa résolution conduit à conclure que, dans un contexte de risque systémique, si le coût de la crise excède celui du renflouement, le FMI devient un prêteur en dernier ressort obligé. Le transfert permet généralement d'éviter la crise, mais l'intervention n'est pas globalement optimale. L'objet du second modèle, de conditionnalité ex ante, est de déterminer si ce mode d'intervention permettrait de limiter les comportements d'aléa moral des prêteurs privés et des emprunteurs. Le transfert effectué par le FMI est, ici, lié à une note préalablement attribuée. Les prêteurs privés sont divisés en deux catégories : les "spéculateurs" et les "investisseurs". Selon nos hypothèses, le régime de conditionnalité ex ante permet de renouer avec une contrainte d'incitation, renforcée par le lien entre investissements durables et système de notation. L'efficience de l'intervention se trouve améliorée en termes d'allocation optimale des ressources multilatérales et de prévention des crises. L'importance accordée par le Fonds Monétaire International à la stabilisation à court terme du système de financement international entraîne cependant la persistance d'un aléa moral de l'emprunteur.

The paper investigates net lending and net borrowing flows of the institutional sectors in Europe since the introduction of the Euro in 1999. Applying a simple statistical apparatus, this paper is novel in describing the sectoral behavior leading up to and during the crisis. We find that (1) many countries of the Northern group were characterized by low public deficits or even budget surpluses, current account surpluses and a private sector in a net lending position. In countries of the Southern periphery, in the Anglo-Saxon countries as well as in many Eastern European Economies private sector net borrowing coincided with a budget deficit and substantial current account deficits. (2) With the onset of the crisis private net lending soared in all countries while all governments incurred deficits, consistent with the notion of a balance sheet recession. (3) Private net lending is pro-cyclical, reinforcing the economic downturn, while public net lending is countercyclical in all countries. (4) Household net lending tends to lead the business cycle, while corporate net lending tends to lag it especially in the Northern group. (5) Prominent concepts asserting causal relationships in sectoral net lending, such as Ricardian equivalence and the twin deficit hypothesis are not supported by the data. (authors' abstract) / Series: Ecological Economic Papers

Differences in financial systems are often named as a prime candidate for the current state of global imbalances. This paper focuses on cross-country heterogeneity in access to international financial markets that derives from the presence of capital controls and argues that the process of capital liberalization over the past decades can explain a substantial fraction of US net external liabilities. We present a simple two-country model with an internationally traded bond, in which capital controls are reflected in the presence of borrowing and lending constraints on that bond. In a US versus the rest of the world (RoW) scenario, we perform experiments that are largely consistent with countrie' liberalization experiences. A reduction in the RoW's controls on capital outflows and/or a tightening in the RoW's borrowing constraint enables the US economy to better insure against consumption risk relative to the rest of the world, and therefore decreases its motives for precautionary asset holdings relative to the rest of the world. As a result of these asymmetric shifts in countries' barriers to capital mobility, the US runs a long run external deficit.

El presente trabajo analiza la influencia de los regímenes cambiarios sobre la dolarización de los pasivos empresariales, focalizándose en la diferencia entre regímenes fijos y flexibles. Para hacerlo se utiliza una muestra de 237 empresas de Argentina, Brasil, Colombia y México para el período 1992-2000, la metodología de estimación GMM-system para modelos de panel dinámicos y dos clasificaciones de regímenes cambiarios. Los resultados sugieren que los regímenes cambiarios fijos, así como su duración y volatilidad, influyen positivamente sobre la proporción de deuda en moneda extranjera mantenida por las firmas. Asimismo, se exploran otros determinantes del grado de dolarización de los pasivos corporativos, introduciéndose variables sugeridas por la literatura pero no analizadas hasta el momento. Se observa que la inestabilidad de la economía afecta las decisiones de cartera de las firmas. A su vez, las expectativas de salvataje por parte del Estado y las regulaciones generan problemas de información asimétrica, incentivando a las firmas a tomar un mayor riesgo cambiario. Por último se explora la relación entre la dolarización de los pasivos corporativos y el original sin interno, concluyendo que la reducción de éste último es, en parte, alcanzada vía dolarización de la deuda de largo plazo.

This paper presents VAR results on the recent economic history of the U.S and focuses on the dependence of U.S. macrofinancial variables on international capital flows. Both gross and net flows are included in the analysis. The results indicate that cross-border funding has affected the build-up in the U.S. housing market irrespective of how these flows are defined and measured. Both the savings glut hypothesis and the banking glut hypothesis are supported by these findings. However, net banking flows appear to explain the higher volatility in the increase in house prices as well as the mortgage loan boom. (authors' abstract) / Series: Department of Economics Working Paper Series