The intended and unintended consequences of financial-market regulations: A general-equilibrium analysis
Adrian Buss,
Bernard Dumas (bernard.dumas@insead.edu),
Raman Uppal and
Grigory Vilkov
Journal of Monetary Economics, 2016, vol. 81, issue C, 25-43
Abstract:
In a production economy with trade in financial markets motivated by the desire to share labor-income risk and to speculate, we show that speculation increases volatility of asset returns and investment growth, increases the equity risk premium, and reduces welfare. Regulatory measures, such as constraints on stock positions, borrowing constraints, and the Tobin tax have similar effects on financial and macroeconomic variables. However, borrowing constraints and the Tobin tax are more successful than constraints on stock positions at improving welfare because they substantially reduce speculative trading without impairing excessively risk-sharing trades.
Keywords: Tobin tax; Borrowing constraints; Short-sale constraints; Stock market volatility; Differences of opinion (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (14)
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Related works:
Working Paper: The Intended and Unintended Consequences of Financial-Market Regulations: A General Equilibrium Analysis (2016)
Working Paper: The intended and unintended consequences of financial-market regulations: A general equilibrium analysis (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:81:y:2016:i:c:p:25-43
DOI: 10.1016/j.jmoneco.2016.03.008
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