A Heterogenous Agents Model Usable for the Analysis of Currency Transaction Taxes
AbstractWe extend the model by DeGrauwe and Grimaldi (2006, EER) by currency transaction taxes. This model explains the exchange rate behavior by the interaction of heterogeneous traders who display either trend chasing behavior or rely on a return of the exchange rate back to its arbitrage free fundamental value. Within this model framework we can show analytically that the steady-state of the original model is unaffected by the transaction tax rate. We inferred from numerical simulations that the transaction tax is able to reduce the number of speculative equilibria to zero. Moreover, we show that the tax will lead to a faster convergence of the system back to its fundamental steady state. --
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Bibliographic InfoPaper provided by Warwick Business School, Finance Group in its series Working Papers with number wp07-04.
Date of creation: 2007
Date of revision:
Other versions of this item:
- Demary, Markus, 2007. "A Heterogenous Agents Model Usable for the Analysis of Currency Transaction Taxes," Economics Working Papers 2007,27, Christian-Albrechts-University of Kiel, Department of Economics.
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
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Research Paper Series
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