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Currency Transaction Tax Elasticity: an Econometric Estimation

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  • Francis Bismans
  • Olivier Damette

Abstract

This article endeavours to measure the elasticity of the volume of the currency exchange transactions to a tax on them. The analysis is principally based on cointegration techniques. This paper is the fi rst attempt to estimate the infl uence of a currency transaction tax on the foreign exchange market volume trading. The econometric estimations suggest that the forex trading volume could be signifi cantly reduced by a Tobin tax. Nevertheless, elasticities are heterogeneous with respect to the currency pairs: the largest elasticities are the euro/dollar and sterling/dollar currency pairs that are also the most traded exchange parities. The values of the estimates are lower when the SURE (Seemingly Unrelated Regression Equations) estimator is used than when the panel estimation is implemented.

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Bibliographic Info

Article provided by CEPII research center in its journal Economie Internationale.

Volume (Year): (2008)
Issue (Month): 115 ()
Pages: 193-212

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Handle: RePEc:cii:cepiei:2008-3tg

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Related research

Keywords: Foreign exchange market; currency transaction tax; elasticity; cointegration; SURE; panel data;

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Cited by:
  1. Francis Bismans & Olivier Damette, 2012. "La taxe Tobin : une synthèse des travaux basés sur la théorie des jeux et l’économétrie," Working Papers of BETA 2012-09, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  2. Olivier Damette, 2013. "Mixture distribution hypothesis and the impact of a Tobin tax on exhange rate volatility : a reassessment," Working Papers of BETA 2013-07, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  3. Olivier Damette & Stéphane Goutte, 2014. "Tobin tax and trading volume tightening: a reassessment," Working Papers halshs-00926805, HAL.
  4. Copenhagen Economics, 2011. "Elasticities of Financial Instruments, Profits and Remuneration," Taxation Papers 30, Directorate General Taxation and Customs Union, European Commission.

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