The Effects of a Financial Transaction Tax in an Artificial Financial Market
AbstractWe investigate the effects of a Financial Transaction Tax (FTT) in an order-driven artificial financial market. FTTs are meant to limit short-term speculative behavior by reducing the amount of excess liquidity in the system. To quantify these effects, adjustments in trading strategies and their effects on liquidity need to be taken into account. We model an agent-based continuous double-auction, allowing for a continuum of investment strategies within the chartist/fundamentalist framework. For certain parameter combinations, our model is able to reproduce certain stylized facts of financial time-series. We find largely positive effects of the FTT for small tax rates. Additionally, for large tax rates we find the effects not to be as negative as previously found
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1868.
Length: 44 pages
Date of creation: Aug 2013
Date of revision:
Transaction Tax; Tobin Tax; Market Microstructure; Agent-Based Models; Speculative Bubbles;
Find related papers by JEL classification:
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-31 (All new papers)
- NEP-CMP-2013-08-31 (Computational Economics)
- NEP-PBE-2013-08-31 (Public Economics)
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