Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/286854 
Year of Publication: 
2021
Citation: 
[Journal:] Decisions in Economics and Finance [ISSN:] 1129-6569 [Volume:] 44 [Issue:] 2 [Publisher:] Springer International Publishing [Place:] Cham [Year:] 2021 [Pages:] 641-667
Publisher: 
Springer International Publishing, Cham
Abstract: 
Based on the seminal asset-pricing model by Brock and Hommes (J Econ Dyn Control 22:1235–1274, 1998), we analytically show that higher wealth taxes increase the risky asset’s fundamental value, enlarge its local stability domain, may prevent the birth of nonfundamental steady states and, if they exist, reduce the risky asset’s mispricing. We furthermore find that higher wealth taxes may hinder the emergence of endogenous asset price oscillations and, if they exist, dampen their amplitudes. Since oscillatory price dynamics may be associated with lower mispricing than locally stable nonfundamental steady states, policymakers may not always want to suppress them by imposing (too low) wealth taxes. Overall, however, our study suggests that wealth taxes tend to stabilize the dynamics of financial markets.
Subjects: 
Asset price dynamics
Wealth taxes
Heterogeneous expectations
Nonlinear dynamics
Stability and bifurcation analysis
JEL: 
D84
G12
G18
G41
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article
Document Version: 
Published Version

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