A heterogenous agents model usable for the analysis of currency transaction taxes
Demary, Markus (2007) A heterogenous agents model usable for the analysis of currency transaction taxes. Working Paper. Coventry: Warwick Business School, Financial Econometrics Research Centre. Working papers (Warwick Business School. Financial Econometrics Research Centre) (No.07-).
WRAP_demary_fwp07-04.pdf - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader
Official URL: http://www2.warwick.ac.uk/fac/soc/wbs/research/wfr...
We extend the model by DeGrauwe and Grimaldi (2006, EER)
by currency transaction taxes. This model explains the exchange rate behavior by the interaction of heterogeneous traders who display either trend chasing behavior or rely on a return of the exchange rate back to its arbitrage free fundamental value. Within this model framework we can show analytically that the steady-state of the original model is unaffected by the transaction tax rate. We inferred from numerical simulations that the transaction tax is able to reduce the number of speculative equilibria to zero. Moreover, we show that the tax will lead to a faster convergence of the system back to its fundamental steady state.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HB Economic Theory|
|Divisions:||Faculty of Social Sciences > Warwick Business School > Financial Econometrics Research Centre
Faculty of Social Sciences > Warwick Business School
|Library of Congress Subject Headings (LCSH):||Foreign exchange rates, Transaction costs, Stock exchanges, Mathematical models|
|Series Name:||Working papers (Warwick Business School. Financial Econometrics Research Centre)|
|Publisher:||Warwick Business School, Financial Econometrics Research Centre|
|Place of Publication:||Coventry|
|Official Date:||10 December 2007|
|Number of Pages:||39|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
|Funder:||Sixth Framework Programme (European Commission) (FP6)|
|Grant number:||516446 (SFP)|
 Brock, W. and C. Hommes (1997), "A Rational Route to Randomness" Econometrica, Vol. 65, 1059-1095.
Actions (login required)
Downloads per month over past year