In this article we use a stochastic model with one representative firm to study business tax policy under default risk …. We will show that, for a given tax rate, the government has an incentive to reduce (increase) financial instability and … default costs if its objective function is welfare (tax revenue). …

earnings or sale of assets, state-subsidised SMEs, debt-financed SMEs, trade-financed SMEs, asset-based financed SMEs, and …

investment project, the tax revenue generated and the welfare are influenced by financial instability. Then, a comparison of … welfare effects of tax policy on start-ups, mature and obliged firms is provided. This comparison provides policy-makers a … tool to shape their tax systems according to the characteristics of their firms. All presented analyses are supported by …

from a financial recession using a model that can account for the observed default and leverage dynamics during the … account for the observed default and leverage dynamics. Following an adverse aggregate shock, banks deleverage through two …