nep-ifn New Economics Papers
on International Finance
Issue of 2007‒12‒19
one paper chosen by
Yi-Nung Yang
Chung Yuan Christian University

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

  1. 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

This nep-ifn issue is ©2007 by Yi-Nung Yang. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.