Might a Securities Transactions Tax Mitigate Excess Volatility?: Some Evidence From the Literature

Markus Haberer ()
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Markus Haberer: Department of Economics, University of Konstanz

No 04-06, CoFE Discussion Paper from Center of Finance and Econometrics, University of Konstanz

Abstract: International financial markets are said to be excessively volatile due to destabilizing speculation and excessive market volume. Transactions taxes might help. From studying the literature we conclude that there must be an optimal market liquidity, which minimizes excess volatility. There are two effects when imposing a transactions tax. Both reduce excess volatility in highly speculative markets when tax rates are small. The total tax effect then is unambiguous. However, in illiquid markets the tax might raise volatility.

Keywords: International Financial Markets; Securities Transactions Tax; Excess Volatility (search for similar items in EconPapers)
JEL-codes: G15 G18 H20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin, nep-fmk, nep-mst and nep-pbe
Date: Written 2004-09
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