EconPapers    
Economics at your fingertips  
 

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
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393216300083
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The Intended and Unintended Consequences of Financial-Market Regulations: A General Equilibrium Analysis (2016) Downloads
Working Paper: The intended and unintended consequences of financial-market regulations: A general equilibrium analysis (2016) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

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

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).

 
Page updated 2024-10-09
Handle: RePEc:eee:moneco:v:81:y:2016:i:c:p:25-43