Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/211100
Authors: 
Cipriani, Marco
Guarino, Antonio
Uthemann, Andreas
Year of Publication: 
2019
Series/Report no.: 
cemmap working paper No. CWP07/19
Abstract: 
We develop a new methodology to estimate the impact of a financial transaction tax (FTT) on informational efficiency, liquidity and volatility. In our sequential trading model there are price elastic noise traders and traders with private information of heterogeneous quality. We estimate the model without a tax and then quantify the effect of an FTT. In our sample, noise traders are price elastic but less so than informed traders. The introduction of an FTT changes the composition of the market, lowering informational efficiency. Even a small, 5 bps, FTT impedes correct price convergence on a sizeable percentage of days.
Subjects: 
Financial Transaction Tax
Market Microstructure
Structural Estimation
JEL: 
G14
D82
C13
Document Type: 
Working Paper

Files in This Item:
File
Size





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