On central bank interventions and transaction taxes
AbstractWe show that carefully designed central bank interventions may have a similar (stabilizing) effect on foreign exchange dynamics as transaction taxes. Transaction taxes seek to curb speculative activity. If speculators consist of chartists and fundamentalists  --  as indicated by many empirical studies  --  central banks may seek to replicate the impact of transaction taxes by countering the orders of these traders. This would simultaneously require trading against the current exchange rate trend and, surprisingly, slowing down the convergence of the exchange rate towards its fundamental value.
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.
Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Applied Financial Economics Letters.
Volume (Year): 3 (2007)
Issue (Month): 1 (January)
Contact details of provider:
Web page: http://www.tandf.co.uk/journals/titles/17446546.asp
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Westerhoff, Frank H. & Dieci, Roberto, 2006.
"The effectiveness of Keynes-Tobin transaction taxes when heterogeneous agents can trade in different markets: A behavioral finance approach,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 30(2), pages 293-322, February.
- Frank Westerhoff, 2004. "The effectiveness of Keynes-Tobin transaction taxes when heterogeneous agents can trade in different markets: A behavioral finance approach," Computing in Economics and Finance 2004 14, Society for Computational Economics.
- Garber, Peter & Taylor, Mark P, 1995. "Sand in the Wheels of Foreign Exchange Markets: A Sceptical Note," Economic Journal, Royal Economic Society, vol. 105(428), pages 173-80, January.
- Mark P. Taylor & Lucio Sarno, 2001.
"Official Intervention in the Foreign Exchange Market: Is It Effective and, If So, How Does It Work?,"
Journal of Economic Literature,
American Economic Association, vol. 39(3), pages 839-868, September.
- Sarno, Lucio & Taylor, Mark P, 2001. "Official Intervention in the Foreign Exchange Market: Is It Effective, and, If So, How Does It Work?," CEPR Discussion Papers 2690, C.E.P.R. Discussion Papers.
- Taylor, Mark P. & Allen, Helen, 1992. "The use of technical analysis in the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 11(3), pages 304-314, June.
- Rosser, J. Jr. & Ahmed, Ehsan & Hartmann, Georg C., 2003. "Volatility via social flaring," Journal of Economic Behavior & Organization, Elsevier, vol. 50(1), pages 77-87, January.
- Mark P. Taylor, 2004.
"Is Official Exchange Rate Intervention Effective?,"
London School of Economics and Political Science, vol. 71, pages 1-11, 02.
- repec:att:wimass:9621 is not listed on IDEAS
- James Tobin, 1978.
"A Proposal for International Monetary Reform,"
Eastern Economic Journal,
Eastern Economic Association, vol. 4(3-4), pages 153-159, Jul/Oct.
- Brock, William A. & Hommes, Cars H., 1998.
"Heterogeneous beliefs and routes to chaos in a simple asset pricing model,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 22(8-9), pages 1235-1274, August.
- De Grauwe, Paul & Grimaldi, M, 2006. "Exchange rate puzzles: A tale of switching attractors," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/101113, Katholieke Universiteit Leuven.
- Christopher J. Neely, 2000.
"The practice of central bank intervention: looking under the hood,"
2000-028, Federal Reserve Bank of St. Louis.
- Christopher J. Neely, 2001. "The practice of central bank intervention: looking under the hood," Review, Federal Reserve Bank of St. Louis, issue May, pages 1-10.
- Lux, T. & M. Marchesi, . "Volatility Clustering in Financial Markets: A Micro-Simulation of Interacting Agents," Discussion Paper Serie B 437, University of Bonn, Germany, revised Jul 1998.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.