The Tax Cuts and Jobs Act (TCJA), effective on December 22, 2017, is the most comprehensive overhaul of U.S. tax code in last 30 years. Historically, when corporate rates are high, interest deduction debt greater, thereby reducing firms’ taxable income. However, with new reforms significantly rates, deductibility no longer as favorable. In this paper, effect TCJA ratios analyzed. authors ...

This paper examines the impact of local tax rates and capital market conditions on the level and composition of borrowing by foreign affiliates of American multinational corporations. The evidence indicates that 10 percent higher local tax rates are associated with 2.8 percent higher debt/asset ratios of American-owned affiliates, and that borrowing from related parties is particularly sensitiv...

Recent years have seen a dramatic decline in the creditworthiness of firms and increasing concern regarding the reliability of credit estimates provided by rating agencies. In this paper, I find evidence that a particular account, the valuation allowance for deferred tax assets, helps predict the future creditworthiness of a firm. Under the provisions of SFAS No. 109, a firm records a deferred ...

This paper studies the interaction between monetary and macro-prudential policies in a simple model with both nominal and financial frictions. The nominal friction gives rise to a conventional monetary policy objective emphasized in the New Keynesian literature. The financial friction, in the form of an occasionally binding collateral constraint, gives rise to a financial stability objective. ...

This paper proposes a theory of government debt which, as opposed to previous theories, delivers an interior steady state that is independent of initial debt. The key elements are nominal public debt and a benevolent government that cannot commit to future policy choices. Governments face a trade-off. On the one hand, they would like to increase the debt and delay taxation, so as to reduce curr...

Weinberg • Special communication M educational debt can be a daunting task for a young physician in the United States. Tuition continues to rise at public and private schools across the country. Higher tuition typically necessitates increased borrowing. In the 2002 Medical School Graduation Questionnaire: All School[s] Report, the Association of American Medical Colleges reports that the mean d...

In models with a representative infinitely lived household, modern versions of tax smoothing imply that the steady-state of government debt should follow a random walk. This is unlikely to be the case in OLG economies, where, the equilibrium interest rate may differ from the policy-maker’s rate of time preference such that it may be optimal to reduce debt today to reduce distortionary taxation ...

Mehra and Prescott (1985) found the difference between average equity and debt returns puzzling because it was too large to be a premium for bearing nondiversifiable aggregate risk. Here, we re-examine this puzzle, taking into account some factors ignored by Mehra and Prescott–taxes, regulatory constraints, and diversification costs–and focusing on long-term rather than short-term savings instr...