Effects of Tobin Taxes in Minority Game markets
We show that the introduction of Tobin taxes in agent-based models of currency markets can lead to a reduction of speculative trading and reduce the magnitude of exchange rate fluctuations at intermediate tax rates. In this regime revenues for the market maker obtained from speculators are maximal. We here focus on Minority Game models of markets, which are accessible by exact techniques from statistical mechanics. Results are supported by computer simulations. Our findings suggest that at finite systems sizes the effect is most pronounced in a critical region around the phase transition of the infinite system, but much weaker if the market is operating far from criticality and does not exhibit anomalous fluctuations.
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.:
- Day, Richard H. & Huang, Weihong, 1990.
"Bulls, bears and market sheep,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 14(3), pages 299-329, December.
- Day, R. & Huang, W., 1988. "Bulls, Bears And Market Sheep," Papers m8822, Southern California - Department of Economics.
- Frank Westerhoff, 2003. "Heterogeneous traders and the Tobin tax," Journal of Evolutionary Economics, Springer, vol. 13(1), pages 53-70, 02.
- Frank Westerhoff, 2002. "Heterogeneous Traders and the Tobin Tax," Computing in Economics and Finance 2002 51, Society for Computational Economics.
- Westerhoff, Frank H. & Dieci, Roberto, 2006. "The effectiveness of Keynes-Tobin transaction taxes when heterogeneous agents can trade in different markets: A behavioral finance approach," Journal of Economic Dynamics and Control, Elsevier, vol. 30(2), pages 293-322, February.
- Frank Westerhoff, 2004. "The effectiveness of Keynes-Tobin transaction taxes when heterogeneous agents can trade in different markets: A behavioral finance approach," Computing in Economics and Finance 2004 14, Society for Computational Economics.
- Eric van Wincoop & Philippe Bacchetta, 2000. "Does Exchange-Rate Stability Increase Trade and Welfare?," American Economic Review, American Economic Association, vol. 90(5), pages 1093-1109, December.
- Philippe BACCHETTA & Eric VAN WINCOOP, 1999. "Does Exchange Rate Stability Increase Trade and Welfare ?," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9917, Université de Lausanne, Faculté des HEC, DEEP.
- G. Ehrenstein & F. Westerhoff & D. Stauffer, 2005. "Tobin tax and market depth," Quantitative Finance, Taylor & Francis Journals, vol. 5(2), pages 213-218.
- G. Ehrenstein & F. Westerhoff & D. Stauffer, 2003. "Tobin tax and market depth," Papers cond-mat/0311581, arXiv.org.
- Chiarella, Carl & He, Xue-Zhong & Hommes, Cars, 2006. "A dynamic analysis of moving average rules," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1729-1753.
- Cars Hommes & Carl Chiarella & Xue-Zhong He, 2004. "A Dynamical Analysis of Moving Average Rules," Computing in Economics and Finance 2004 238, Society for Computational Economics.
- Carl Chiarella & Tony He & Cars H. Hommes, 2005. "A Dynamic Analysis of Moving Average Rules," Tinbergen Institute Discussion Papers 05-057/1, Tinbergen Institute.
- Carl Chiarella & Xue-Zhong He & Cars Hommes, 2004. "A Dynamic Analysis of Moving Average Rules," Research Paper Series 133, Quantitative Finance Research Centre, University of Technology, Sydney.
- Chiarella, C. & He, X.-Z. & Hommes, C.H., 2004. "A Dynamic Analysis of Moving Average Rules," CeNDEF Working Papers 04-14, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Carol L. Osler, 2006. "Macro lessons from microstructure," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 11(1), pages 55-80.
- Johnson, Neil F. & Jefferies, Paul & Hui, Pak Ming, 2003. "Financial Market Complexity," OUP Catalogue, Oxford University Press, number 9780198526650, April.
- Marsili, Matteo, 2001. "Market mechanism and expectations in minority and majority games," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 299(1), pages 93-103.
- R. Cont, 2001. "Empirical properties of asset returns: stylized facts and statistical issues," Quantitative Finance, Taylor & Francis Journals, vol. 1(2), pages 223-236.
- De Grauwe, Paul & Grimaldi, Marianna, 2006. "Exchange rate puzzles: A tale of switching attractors," European Economic Review, Elsevier, vol. 50(1), pages 1-33, January.
- De Grauwe, Paul & Grimaldi, Marianna, 2004. "Exchange Rate Puzzles: A Tale of Switching Attractors," Working Paper Series 163, Sveriges Riksbank (Central Bank of Sweden).
- Hommes, Cars H., 2006. "Heterogeneous Agent Models in Economics and Finance," Handbook of Computational Economics,in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 23, pages 1109-1186 Elsevier.
- Cars H. Hommes, 2005. "Heterogeneous Agent Models in Economics and Finance," Tinbergen Institute Discussion Papers 05-056/1, Tinbergen Institute.
- Cont, Rama & Bouchaud, Jean-Philipe, 2000. "Herd Behavior And Aggregate Fluctuations In Financial Markets," Macroeconomic Dynamics, Cambridge University Press, vol. 4(02), pages 170-196, June.
- Gudrun Ehrenstein, 2002. "Cont-Bouchaud percolation model including Tobin tax," Papers cond-mat/0205320, arXiv.org.
- Mende, Alexander & Menkhoff, Lukas, 2003. "Tobin Tax Effects Seen from the Foreign Exchange Market's Microstructure," International Finance, Wiley Blackwell, vol. 6(2), pages 227-247, Summer. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:arx:papers:cond-mat/0603134. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators)
If references are entirely missing, you can add them using this form.