Thursday, 23 February, 2023

09:00 | For Study Applicants | ONLINE

Meet our Students Online: Sijia Liu

Are you wondering what it's like to study at CERGE-EI?
You´re welcome to join Sijia Liu´s presentation
on Feb 23 at 16:00 (Beijing) / 09:00 (Prague)
She will share her personal experience and answer all your questions.

 

Presenter: Sijia Liu
Online link for the presenation: https://meeting.tencent.com/dm/RifBFCK4FZwo
Tencent Meeting:468-707-146
Password:918273

meet our students sijia

14:00 | Macro Research Seminar

Pau Belda (Barcelona School of Economics) "Capital Gains Taxation, Learning and Bubbles"

Pau Belda, MSc.

Barcelona School of Economics, Spain

Join online: https://call.lifesizecloud.com/17276028  (password 4998)


Abstract: Why have there been more asset price boom-bust cycles since the 1980s despite the drop in macroeconomic risk? This paper argues that the fall of the Capital Gains Tax (CGT) has been a crucial factor. In a model of learning about prices, I show that a lower CGT make prices more responsive to changes in investors’ beliefs, thereby elevating the likelihood of self-fulfilling booms and busts. The model can account for several hard-to-explain facts about the US stock market when using the observed path of tax cuts. In particular, it replicates 40% of the increase in excess volatility despite the decline in consumption growth volatility and 75% of the equity premium. Even with the drop in the safe real interest rate, the model predicts that the rise in volatility would have been largely avoided if tax cuts had not been implemented. Finally, I show that optimal policy prescribes a CGT that lean against market expectations, preventing beliefdriven business cycles. Altogether, a CGT is identified as a unique macroprudential instrument that enhances the autonomy of monetary policy from financial stability considerations.

JEL Classification: D83, D84, E32, E44, E62, G12, G14
Keywords: Capital Taxation, Asset Pricing, Expectations, Macroprudential Policy, Equity Premium

Full Text: Capital Gains Taxation, Learning and Bubbles