nep-ifn 2007-12-19 papers

on International Finance

Issue of 2007‒12‒19
one paper chosen by
Yi-Nung Yang
Chung Yuan Christian University

A Heterogenous Agents Model Usable for the Analysis of Currency Transaction Taxes By Demary, Markus

A Heterogenous Agents Model Usable for the Analysis of Currency Transaction Taxes

By:	Demary, Markus
Abstract:	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.
Keywords:	Currency Transaction Taxes, Exchange Rates, Financial Market Volatility, Heterogenous Agents Model, Numerical Simulation
JEL:	C15 F31 F32 G15 G18
Date:	2007
URL:	http://d.repec.org/n?u=RePEc:zbw:cauewp:6796&r=ifn

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