AGUIAR, MARK; AMADOR, MANUEL; GOPINATH, GITA - In: Review of Economic Studies 76 (2009) 1, pp. 1-31
We characterize optimal taxation of foreign capital and optimal sovereign debt policy in a small open economy where the government cannot commit to policy, seeks to insure a risk-averse domestic constituency, and is more impatient than the market. Optimal policy generates long-run cycles in both...