Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/111228
Authors: 
Berentsen, Aleksander
Huber, Samuel
Marchesiani, Alessandro
Year of Publication: 
2014
Series/Report no.: 
Working Paper Series, University of Zurich, Department of Economics 176
Abstract: 
We investigate the positive and normative implications of a tax on financial market transactions in a dynamic general equilibrium model, where agents face idiosyncratic liquidity shocks and financial trading is essential. Our main finding is that agents' portfolio choices display a pecuniary externality which results in too much trading. We calibrate the model to U.S. data and find an optimal tax rate of 2.5 percent. Imposing this tax reduces trading in financial markets by 30 percent.
Document Type: 
Working Paper

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