Some effects of transaction taxes under different microstructures

Paolo Pellizzari and Frank Westerhoff

Journal of Economic Behavior & Organization, 2009, vol. 72, issue 3, 850-863

Abstract: We show that the effectiveness of transaction taxes depends on the market microstructure. Within our model, heterogeneous traders use a blend of technical and fundamental trading strategies to determine their orders. In addition, they may become inactive if the profitability of trading decreases. We find that in a continuous double auction market the imposition of a transaction tax is not likely to stabilize financial markets since a reduction in market liquidity amplifies the average price impact of a given order. In a dealership market, however, abundant liquidity is provided by specialists, and thus a transaction tax may reduce volatility by crowding out speculative orders.

Keywords: Transaction; tax; Tobin; tax; Microstructures; Agent-based; models; Liquidity (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (66)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167-2681(09)00214-5
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Some effects of transaction taxes under different microstructures (2009)
Working Paper: Some effects of transaction taxes under different microstructures (2009)
Working Paper: Some Effects of Transaction Taxes Under Different Microstructures (2007)
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:jeborg:v:72:y:2009:i:3:p:850-863

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().