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Bank Taxes, Bailouts and Financial Crises

Author

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  • Michael Keen

Abstract

Following the Great Financial Crisis, more than a dozen countries adopted innovative bank taxes as part of their response. This paper characterizes, calibrates and discusses Pigovian taxes on bank borrowing to address externalities associated with either the collapse of systemic financial institutions or, to prevent that, public guarantees to bail out their creditors. It also characterizes optimal bailout policy, differentiating between circumstances in which the government can and cannot commit. Building on the analysis for a representative bank, it considers the implications for corrective taxation of various aspects of bank heterogeneity, connectedness, and asymmetries of information.

Suggested Citation

  • Michael Keen, 2018. "Bank Taxes, Bailouts and Financial Crises," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 74(1), pages 4-33, March.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201803)74:1_4:btbafc_2.0.tx_2-b
    DOI: 10.1628/fa-2018-0001
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    Cited by:

    1. Bremus, Franziska & Schmidt, Kirsten & Tonzer, Lena, 2020. "Interactions between bank levies and corporate taxes: How is bank leverage affected?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 118.

    More about this item

    Keywords

    bank taxation; Pigovian taxation; financial crisis;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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