Author (Corporate) | European Commission: DG Economic and Financial Affairs |
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Series Title | European Economy: Economic Papers |
Series Details | No.450, March 2012 |
Publication Date | March 2012 |
ISBN | 978-92-79-22971-8 |
ISSN | 1725-3187 |
EC | KC-AI-11-450-EN-N |
Content Type | Journal | Series | Blog, Report |
The paper studies the impact of a securities transaction tax (STT) on financial trading, stock prices and real economic variables in a closed-economy dynamic stochastic general-equilibrium model featuring financial frictions. The model incorporates channels by which 'noise trading' affects real economic volatility. Firms' investment expenditure is related to the value of their outstanding shares. The model is calibrated to stylised facts of financial trading and firms' financing. The simulations suggest distortive effects of the STT on real variables similar to those of corporate income taxation. At the same time, the STT reduces economic volatility, but this stabilisation gain is quantitatively modest. |
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Source Link | Link to Main Source http://ec.europa.eu/economy_finance/publications/economic_paper/2012/ecp450_en.htm |
Countries / Regions | Eastern Europe, Europe |