The economic consequences of a Tobin tax - An experimental analysis
AbstractThe effects of a Tobin tax on foreign exchange markets have long been disputed. We present an experiment with currency trading on two markets, where either none, one, or both markets are taxed. Our results confirm the hitherto undisputed issues: a tax reduces trading volume, shifts market share to untaxed markets, and leads to negligible tax revenues if tax havens exist. Concerning the controversial issues we find that (i) volatility effects depend on the existence of tax havens and on market size, (ii) market efficiency remains unaffected by the tax, (iii) short-term speculation is reduced, and (iv) the tax has persistent effects even after its abolishment.
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Bibliographic InfoPaper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2007-18.
Date of creation: Aug 2007
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Tobin tax; Experiment; Foreign exchange; Market efficiency; Trading volume; Volatility;
Other versions of this item:
- Hanke, Michael & Huber, Jürgen & Kirchler, Michael & Sutter, Matthias, 2010. "The economic consequences of a Tobin tax--An experimental analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 74(1-2), pages 58-71, May.
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- 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-2007-08-27 (All new papers)
- NEP-EXP-2007-08-27 (Experimental Economics)
- NEP-MAC-2007-08-27 (Macroeconomics)
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