On the non-homogeneous effect of financial transaction taxes
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- On the non-homogeneous effectof financial transaction taxes_(publisher_version)
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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.
Originalsprog | Engelsk |
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Tidsskrift | Economics and Business Letters |
Vol/bind | 9 |
Udgave nummer | 3 |
Sider (fra-til) | 230-239 |
DOI | |
Status | Udgivet - 8 dec. 2020 |
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