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Effects of Tobin taxes in minority game markets

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  • Bianconi, Ginestra
  • Galla, Tobias
  • Marsili, Matteo
  • Pin, Paolo

Abstract

We show that the introduction of Tobin taxes in agent-based models of currency markets can lead to a reduction of both speculative trading and the magnitude of exchange rate fluctuations at intermediate tax rates. In this regime revenues obtained from speculators are maximal for the institutions acting as market makers. We here focus on minority game models of markets, which are accessible by exact techniques from statistical mechanics. Results are supported by computer simulations. Our findings suggest that at finite systems sizes the effect is most pronounced in a critical region around the phase transition of the infinite system, but much weaker if the market is operating far from criticality and does not exhibit anomalous fluctuations.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 70 (2009)
Issue (Month): 1-2 (May)
Pages: 231-240

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Handle: RePEc:eee:jeborg:v:70:y:2009:i:1-2:p:231-240

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Web page: http://www.elsevier.com/locate/jebo

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Keywords: Tobin tax Minority games;

References

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  9. Frank Westerhoff, 2002. "Heterogeneous Traders and the Tobin Tax," Computing in Economics and Finance 2002 51, Society for Computational Economics.
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Cited by:
  1. F. Caccioli & M. Marsili & P. Vivo, 2009. "Eroding market stability by proliferation of financial instruments," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, vol. 71(4), pages 467-479, October.
  2. Hynek Lavicka & Tomas Lichard & Jan Novotny, 2014. "Sand in the Wheels or Wheels in the Sand? Tobin Taxes and Market Crashes," CERGE-EI Working Papers wp511, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  3. 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.
  4. 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.

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