On the non-homogeneous effect of financial transaction taxes
Research output: Contribution to journal › Journal article › Research › peer-review
Documents
- On the non-homogeneous effectof financial transaction taxes_(publisher_version)
Final published version, 292 KB, PDF document
This paper investigates the impact of a financial transaction tax (FTT) in a classic financial market setting. The benchmark analysis is based on an extension of the model presented in Kyle (1985). Opposed to the existing literature, I am able to find equilibrium values with a linear tax. Results of the benchmark model confirm standard findings of FTTs, such as an increased bid–ask spread and an overall less deep market. Importantly, I find that the introduction of a tax leads to a non–linear pricing function. In turn, the model predicts a decrease in market depth and trading aggressiveness for small trades, whereas for larger trades the introduction of an FTT only leads to increased prices and spreads.
Original language | English |
---|---|
Journal | Economics and Business Letters |
Volume | 9 |
Issue number | 3 |
Pages (from-to) | 230-239 |
DOIs | |
Publication status | Published - 8 Dec 2020 |
ID: 252830646