Securities Transaction Tax and Market Volatility
AbstractOne well-known regulatory mechanism in securities markets is the use of a securities transaction tax (STT). The conventional wisdom suggests that increases in an STT reduce market volatility by discouraging the trading activity of destabilising short-term traders. A contrary view argues that STT may well increase market volatility due to the reduction in market liquidity. This article rationalises both views in a general equilibrium framework with noise trading. With fundamental risk and supply risk the model is able to document both the conventional wisdom and the contrarian view. We also discuss special cases where there is only fundamental risk or supply risk. Copyright 2005 Royal Economic Society.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 115 (2005)
Issue (Month): 506 (October)
Contact details of provider:
Postal: Office of the Secretary-General, School of Economics and Finance, University of St. Andrews, St. Andrews, Fife, KY16 9AL, UK
Phone: +44 1334 462479
Web page: http://www.res.org.uk/
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Frank H. Westerhoff, 2008. "The Use of Agent-Based Financial Market Models to Test the Effectiveness of Regulatory Policies," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 228(2+3), pages 195-227, June.
- Xu, Juanyi, 2010. "Noise traders, exchange rate disconnect puzzle, and the Tobin tax," Journal of International Money and Finance, Elsevier, vol. 29(2), pages 336-357, March.
- Foucault, Thierry & Sraer, David & Thesmar, David, 2008.
"Individual Investors and Volatility,"
CEPR Discussion Papers
6915, C.E.P.R. Discussion Papers.
- Olivier Damette & Stéphane Goutte, 2014. "Tobin tax and trading volume tightening: a reassessment," Working Papers halshs-00926805, HAL.
- 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.
- Markku Lanne & Timo Vesala, 2010.
"The effect of a transaction tax on exchange rate volatility,"
International Journal of Finance & Economics,
John Wiley & Sons, Ltd., vol. 15(2), pages 123-133.
- Markku Lanne & Timo Vesalay, 2005. "The Effect of a Transaction Tax on Exchange Rate Volatility," Economics Working Papers ECO2005/19, European University Institute.
- Lanne , Markku & Vesala , Timo, 2006. "The effect of a transaction tax on exchange rate volatility," Research Discussion Papers 11/2006, Bank of Finland.
- Lendvai, Julia & Raciborski, Rafal & Vogel, Lukas, 2013. "Macroeconomic effects of an equity transaction tax in a general-equilibrium model," Journal of Economic Dynamics and Control, Elsevier, vol. 37(2), pages 466-482.
- Gunther Capelle-Blancard & Olena Havrylchyk, 2013.
"The Impact of the French Securities Transaction Tax on Market Liquidity and Volatility,"
Documents de travail du Centre d'Economie de la Sorbonne
13085, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
- Gunther CAPELLE-BLANCARD & HAVRYLCHYK, Olena, 2014. "The Impact of the French Securities Transaction Tax on Market Liquidity and Volatility," Discussion papers 14007, Research Institute of Economy, Trade and Industry (RIETI).
- Thornton Matheson, 2012. "Security transaction taxes: issues and evidence," International Tax and Public Finance, Springer, vol. 19(6), pages 884-912, December.
- Gunther Capelle-Blancard & Olena Havrylchyk, 2013. "The Impact of the French Securities Transaction Tax on Market Liquidity and Volatility," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) halshs-00940251, HAL.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.