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Title:On the incidence of a financial transactions tax in a model with fire sales PDF Logo
Authors:Bierbrauer, Felix
Issue Date:2012
Series/Report no.:CESifo Working Paper: Public Finance 3870
Abstract:This paper studies the impact of a financial transactions tax on a financial market where financial institutions trade with each other. Assets are marked to the market and financial institutions with negative equity are forced out of business. There are two main results: First, if all banks have enough liquidity so that they can honor their short-term obligations, a financial transactions tax is entirely neutral. Second, in a model with correlated investment risk and short-term financing of banks, a financial transactions tax contributes to financial distress and undoes other policy measures that are used to stabilize financial markets.
Subjects:financial transactions tax
financial stability
financial markets
cash-in-the-market-pricing
marking-to-market
JEL:H22
G18
G21
G28
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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