Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/129060 
Year of Publication: 
2016
Series/Report no.: 
SAFE Working Paper No. 124
Publisher: 
Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe, Frankfurt a. M.
Abstract: 
In a production economy with trade in financial markets motivated by the desire to share labor-income risk and to speculate, we show that speculation increases volatility of asset returns and investment growth, increases the equity risk premium, and reduces welfare. Regulatory measures, such as constraints on stock positions, borrowing constraints, and the Tobin tax have similar effects on financial and macroeconomic variables. Borrowing limits and a financial transaction tax improve welfare because they substantially reduce speculative trading without impairing excessively risk-sharing trades.
Subjects: 
Tobin tax
borrowing constraints
short-sale constraints
stock market volatility
incomplete markets
differences of opinion
JEL: 
G01
G18
G12
E44
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
848.89 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.