Are transaction taxes a cause of financial instability?Fulvio Fontini, Elena Sartori and Marco Tolotti Physica A: Statistical Mechanics and its Applications, 2016, vol. 450, issue C, 57-70 Abstract: We analyze a stylized market where N boundedly rational agents may decide to trade or not a share of a risky asset at subsequent trading dates. Agents’ payoff depends on returns, which are endogenously determined taking into account observed and forecasted demand and an exogenous transaction tax. We study the time evolutions of demand, returns and market activity. We show that the introduction of a transaction tax generally helps in reducing variability of returns and market activity. On the other hand, there are market conditions under which a low taxation may lead the market into a very unstable phase characterized by the fluctuation of the fundamentals around two different regimes; indeed, under these circumstances, heteroscedasticity of time series is detected and statistically analyzed. Keywords: Endogenous dynamics; Heteroscedasticity; Market game; Markov switching models; Transaction cost; Tobin taxation (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:eee:phsmap:v:450:y:2016:i:c:p:57-70 DOI: 10.1016/j.physa.2015.12.151 Access Statistics for this article Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis More articles in Physica A: Statistical Mechanics and its Applications from Elsevier |
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