Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/127377 
Authors: 
Year of Publication: 
2014
Series/Report no.: 
Discussion Paper Series No. 563
Publisher: 
University of Heidelberg, Department of Economics, Heidelberg
Abstract: 
This papers studies the impact of a financial transactions tax on the trading volume and asset price volatility in a model with heterogeneous beliefs. To model heterogeneous beliefs we follow Kurz (1994, 1997) and restrict the class of beliefs to the subset of rational beliefs. We study a tax on bond and asset purchases. The simulated model shows that the introduction of a transaction tax results in a lower trading volume and therefore in less liquid financial markets. Because of the decreased liquidity the volatility of the stock market increases. We also study the welfare effects of a financial transaction tax and the simulation results also show that there is only a small change in welfare.
Subjects: 
Transaction Tax
Financial Regulation
Heterogeneous Beliefs
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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