On the incidence of a financial transactions tax in a model with fire sales

Felix Bierbrauer

No 55, Working Paper Series in Economics from University of Cologne, Department of Economics

Abstract: This paper studies the impact of a financial transactions tax on a financial market where financial institutions trade with each other. Assets are marked to the market and financial institutions with negative equity are forced out of business. There are two main results: First, if all banks have enough liquidity so that they can honor their short-term obligations, a financial transactions tax is entirely neutral. Second, in a model with correlated investment risk and short-term financing of banks, a financial transactions tax contributes to financial distress and undoes other policy measures that are used to stabilize financial markets.

Keywords: Financial transactions tax; financial stability; financial markets; cash-in-the-market-pricing; marking-to-market (search for similar items in EconPapers)
JEL-codes: G18 G21 G28 H22 (search for similar items in EconPapers)
Date: 2012-06-26
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://ockenfels.uni-koeln.de/fileadmin/wiso_fak/ ... _download/wp0055.pdf (application/pdf)

Related works:
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:kls:series:0055

Access Statistics for this paper

More papers in Working Paper Series in Economics from University of Cologne, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Kiryl Khalmetski ( this e-mail address is bad, please contact ).