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Fiscal Financing and Investment Irreversibility: The Role of Dividend Taxation

Research output: Working paper

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Fiscal Financing and Investment Irreversibility: The Role of Dividend Taxation. / Ghilardi, Matteo F.; Zilberman, Roy.
International Monetary Fund (IMF), 2025. (International Monetary Fund (IMF) Working Paper; No. 2025/083).

Research output: Working paper

Harvard

Ghilardi, MF & Zilberman, R 2025 'Fiscal Financing and Investment Irreversibility: The Role of Dividend Taxation' International Monetary Fund (IMF) Working Paper, no. 2025/083, International Monetary Fund (IMF). https://doi.org/10.5089/9798229008969.001

APA

Ghilardi, M. F., & Zilberman, R. (2025). Fiscal Financing and Investment Irreversibility: The Role of Dividend Taxation. (International Monetary Fund (IMF) Working Paper; No. 2025/083). International Monetary Fund (IMF). https://doi.org/10.5089/9798229008969.001

Vancouver

Ghilardi MF, Zilberman R. Fiscal Financing and Investment Irreversibility: The Role of Dividend Taxation. International Monetary Fund (IMF). 2025 May 2. (International Monetary Fund (IMF) Working Paper; 2025/083). doi: 10.5089/9798229008969.001

Author

Ghilardi, Matteo F. ; Zilberman, Roy. / Fiscal Financing and Investment Irreversibility : The Role of Dividend Taxation. International Monetary Fund (IMF), 2025. (International Monetary Fund (IMF) Working Paper; 2025/083).

Bibtex

@techreport{5f569f71041d4367b28962262a8f1f12,
title = "Fiscal Financing and Investment Irreversibility: The Role of Dividend Taxation",
abstract = "We examine the macroeconomic, asset pricing, and public debt consequences of deficit-financing dividend taxation in a dynamic general equilibrium model featuring partial investment irreversibility. Dividend taxes interact directly with the occasionally-binding irreversibility constraint, generating tax-augmented user-cost and hangover channels that both shape investment and debt-to-output fluctuations and account for a sizeable share of their long-run volatilities. Our analysis further reveals that debt-offsetting dividend tax hikes initially trigger investment inactivity through higher user-costs, followed by a surge driven by intertemporal tax arbitrage and hangover effects. Finally, debt-driven dividend tax rules amplify asset price fluctuations while delivering only modest fiscal revenue changes.",
keywords = "Dividend Taxation, Investment Frictions, Asset Prices, Deficit Financing;, Public Debt",
author = "Ghilardi, {Matteo F.} and Roy Zilberman",
year = "2025",
month = may,
day = "2",
doi = "10.5089/9798229008969.001",
language = "English",
volume = "2025/083",
series = "International Monetary Fund (IMF) Working Paper",
publisher = "International Monetary Fund (IMF)",
number = "2025/083",
type = "WorkingPaper",
institution = "International Monetary Fund (IMF)",

}

RIS

TY - UNPB

T1 - Fiscal Financing and Investment Irreversibility

T2 - The Role of Dividend Taxation

AU - Ghilardi, Matteo F.

AU - Zilberman, Roy

PY - 2025/5/2

Y1 - 2025/5/2

N2 - We examine the macroeconomic, asset pricing, and public debt consequences of deficit-financing dividend taxation in a dynamic general equilibrium model featuring partial investment irreversibility. Dividend taxes interact directly with the occasionally-binding irreversibility constraint, generating tax-augmented user-cost and hangover channels that both shape investment and debt-to-output fluctuations and account for a sizeable share of their long-run volatilities. Our analysis further reveals that debt-offsetting dividend tax hikes initially trigger investment inactivity through higher user-costs, followed by a surge driven by intertemporal tax arbitrage and hangover effects. Finally, debt-driven dividend tax rules amplify asset price fluctuations while delivering only modest fiscal revenue changes.

AB - We examine the macroeconomic, asset pricing, and public debt consequences of deficit-financing dividend taxation in a dynamic general equilibrium model featuring partial investment irreversibility. Dividend taxes interact directly with the occasionally-binding irreversibility constraint, generating tax-augmented user-cost and hangover channels that both shape investment and debt-to-output fluctuations and account for a sizeable share of their long-run volatilities. Our analysis further reveals that debt-offsetting dividend tax hikes initially trigger investment inactivity through higher user-costs, followed by a surge driven by intertemporal tax arbitrage and hangover effects. Finally, debt-driven dividend tax rules amplify asset price fluctuations while delivering only modest fiscal revenue changes.

KW - Dividend Taxation

KW - Investment Frictions

KW - Asset Prices

KW - Deficit Financing;

KW - Public Debt

U2 - 10.5089/9798229008969.001

DO - 10.5089/9798229008969.001

M3 - Working paper

VL - 2025/083

T3 - International Monetary Fund (IMF) Working Paper

BT - Fiscal Financing and Investment Irreversibility

PB - International Monetary Fund (IMF)

ER -