 Taxing financial transactions in fundamentally heterogeneous marketsEdoardo Gaffeo and Massimo Molinari No 175, Working Papers in Public Economics from Department of Economics and Law, Sapienza University of Roma Abstract: The recent global financial crisis has revived a well-honored debate on the desirability and feasibility of taxing financial activities to curb speculation and promote price stability. In this paper we apply agent-based computational techniques to explore this issue in a multi-market environment in which the processes driving the fundamental value of the securities traded in different jurisdictions are heterogeneous. A natural exemplification is to assume that security dealers have the opportunity of submitting orders by choosing among stock markets at different stages of development. We argue that the proper policy objective to be targeted is not volatility in itself, but that in excess of the discounted stream of subsequent dividends, that is price efficiency. In this case, a global coordination is incentive-compatible, given that it minimizes the distortion associated to speculative trading on the one hand, and it ensures that the loss of trading volume is lower if compared to the case of unilateral taxation on the other one. Notwithstanding a fundamental heterogeneity of the markets involved, the optimal tax rate turns out to be uniform. Keywords: agent-based models; financial transaction tax; heterogeneous traders (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sap:wpaper:wp175 Access Statistics for this paper More papers in Working Papers in Public Economics from Department of Economics and Law, Sapienza University of Roma |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.