Securities Transaction Taxes: Macroeconomic Implications in a General-Equilibrium Model
AbstractThe paper studies the impact of a securities transaction tax (STT) on financial trading, stock prices and real economic variables in a closed-economy dynamic stochastic general-equilibrium model featuring financial frictions. The model incorporates channels by which 'noise trading' affects real economic volatility. Firms' investment expenditure is related to the value of their outstanding shares. The model is calibrated to stylised facts of financial trading and firms' financing. The simulations suggest distortive effects of the STT on real variables similar to those of corporate income taxation. At the same time, the STT reduces economic volatility, but this stabilisation gain is quantitatively modest.
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Bibliographic InfoPaper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 450.
Length: 35 pages
Date of creation: Mar 2012
Date of revision:
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Find related papers by JEL classification:
- E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-04-10 (All new papers)
- NEP-CMP-2012-04-10 (Computational Economics)
- NEP-DGE-2012-04-10 (Dynamic General Equilibrium)
- NEP-MAC-2012-04-10 (Macroeconomics)
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