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 Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2007,27.
Date of creation: 2007
Date of revision:
Currency Transaction Taxes; Exchange Rates; Financial Market Volatility; Heterogenous Agents Model; Numerical Simulation;
Other versions of this item:
- Markus Demary, 2007. "A Heterogenous Agents Model Usable for the Analysis of Currency Transaction Taxes," Working Papers wp07-04, Warwick Business School, Finance Group.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-12-19 (All new papers)
- NEP-CBA-2007-12-19 (Central Banking)
- NEP-CMP-2007-12-19 (Computational Economics)
- NEP-IFN-2007-12-19 (International Finance)
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.:
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"An Adaptive Model on Asset Pricing and Wealth Dynamics with Heterogeneous Trading Strategies,"
Research Paper Series
84, Quantitative Finance Research Centre, University of Technology, Sydney.
- Carl Chiarella & Tony He, 2002. "An Adaptive Model on Asset Pricing and Wealth Dynamics with Heterogeneous Trading Strategies," Computing in Economics and Finance 2002 135, Society for Computational Economics.
- Menkhoff, Lukas, 1997. "Examining the Use of Technical Currency Analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 2(4), pages 307-18, October.
- 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.
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