Tag Archives: interest

How Does Deleveraging Affect Funding Market Liquidity?

By | August 31, 2022
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Financial institutions are highly leveraged due to the extremely low interest rates of the past decade. However, interest rates are now rising worldwide due to inflationary pressures, which can lead to plunging stock markets and significant deleveraging of financial institutions. Policymakers, academics, and practitioners are concerned about the impact of deleveraging. In our recent paper,… Read More »

How Does Removing the Tax Benefits of Debt Affect Firms? Evidence from the 2017 US Tax Reform

By | August 3, 2021
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Almost all countries around the world have historically allowed businesses to write off interest expenses against taxable income. Critics argue that the tax-favored status of debt has created a corporate debt pileup, thereby exacerbating economic downturns. This argument, which gained more attention after the 2008 global financial crisis, implicitly assumes that the tax incentives have… Read More »