On the non-homogeneous effect of financial transaction taxes
Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
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On the non-homogeneous effect of financial transaction taxes. / Thöni, Patrick.
I: Economics and Business Letters, Bind 9, Nr. 3, 08.12.2020, s. 230-239.Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
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TY - JOUR
T1 - On the non-homogeneous effect of financial transaction taxes
AU - Thöni, Patrick
PY - 2020/12/8
Y1 - 2020/12/8
N2 - 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.
AB - 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.
U2 - 10.17811/ebl.9.3.2020.230-239
DO - 10.17811/ebl.9.3.2020.230-239
M3 - Journal article
VL - 9
SP - 230
EP - 239
JO - Economics and Business Letters
JF - Economics and Business Letters
SN - 2254-4380
IS - 3
ER -
ID: 252830646