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Lisa Kastner - One of the best experts on this subject based on the ideXlab platform.
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business lobbying under salience financial industry mobilization against the european financial Transaction Tax
Journal of European Public Policy, 2018Co-Authors: Lisa KastnerAbstract:This article examines interest group conflicts surrounding the financial Transaction Tax (FTT) debate in the European Union (EU). Specifically, it focuses on the advocacy efforts of EU-based financi...
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business lobbying under salience financial industry mobilization against the european financial Transaction Tax
Sciences Po publications, 2017Co-Authors: Lisa KastnerAbstract:This article examines interest group conflicts surrounding the financial Transaction Tax (FTT) debate in the European Union (EU). Specifically, it focuses on the advocacy efforts of EU-based financial industry groups at different stages of the policy debate. The article provides a detailed description of changes to the post-crisis regulatory environment and points to public salience as important factor that can constrain business power. Much in line with the existing literature, industry groups did not fare very well under conditions of high salience and public pressure during the agenda-setting stage. However, this article also shows that in order to get back on its feet, the financial sector lobby had to employ a combination of quiet and noisy politics during later stages of the policy process. As soon as the contextual conditions provided by the financial crisis started to fade away, industry groups were able to bounce back by using a framing strategy that linked their arguments against an FTT to broader societal goals, by disseminating scientific evidence and by building coalitions with business groups outside of finance in order to water-down the proposed directive.
George H. K. Wang - One of the best experts on this subject based on the ideXlab platform.
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Transaction Tax and Market Quality of U.S. Futures Markets: An Ex-Ante Analysis
2012Co-Authors: George H. K. Wang, C. Johan Bjursell, Jot YauAbstract:In this paper, we analyze the impact of a Transaction Tax on the market quality of U.S. futures markets by estimating the elasticity of trading volume and of price volatility with respect to bid-ask spread in a three-equation model framework for eleven financial, agricultural, metals, and energy futures for the period 2005-2010. We find that: (1) Trading volume has a negative relationship with bid-ask spread and a positive relationship with price volatility after controlling for other factors; (2) Bid-ask spread has a negative relationship with trading volume and a positive relationship with price volatility; and (3) Price volatility has a positive relationship with bid-ask spread and with trading volume after controlling for other variables. We demonstrate that a Transaction Tax, which is analogous to a bigger bid-ask spread, will drastically reduce trading volume if the Tax constitutes a significant increase in the total fixed trading cost, and/or the elasticity of trading volume with respect to Transaction cost is high enough. Thus, a Transaction Tax may not raise substantial revenue for the government as suggested in other studies.
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Would a Financial Transaction Tax Affect Financial Market Activity? Insights from Future Markets
2012Co-Authors: George H. K. Wang, Jot YauAbstract:In the wake of the recent financial crisis, several commentators have suggested a Transaction Tax on financial markets. The potential consequences of such a Tax could be hazardous to the financial markets affected as well as to the economy. In this paper, we review the relevant theoretical and empirical literature and apply our findings to estimate the possible impact of a Transaction Tax on U.S. futures market activity as well as its utility as potential Tax revenue. We find that the impact of a Transaction Tax on market activity (trading volume, bid-ask spread, and price volatility) will determine the potential of such a Tax as a source of government revenue. We also find that the current estimated elasticity of trading volume with respect to a Transaction Tax in the U.S. futures markets is much higher than those reported in the extant literature and those used by the government in such computation. We show that a Transaction Tax on futures trading will not only fail to generate the expected Tax revenue, it will likely drive business away from U.S. exchanges and toward unTaxed foreign markets. A review of the literature and estimates contained here indicates that there is an inverse relationship between Transaction cost (bid-ask spread) and trading volume; to the extent that a Transaction Tax increases costs, trading volumes will likely fall. There is also a positive relationship between Transaction cost and price volatility, suggesting that the imposition of a Transaction Tax could actually increase financial market fragility, increasing the likelihood of a financial crisis rather than reducing it. Perversely, the imposition of a financial Transaction Tax could have results that are exactly the opposite of those hoped for by its proponents.
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Transaction Tax and Market Quality of the Taiwan Stock Index Futures
2006Co-Authors: Robin K. Chou, George H. K. WangAbstract:On May 1, 2000, the Taiwan government reduced the Tax levied on futures Transactions on the Taiwan Futures Exchange from 5 to 2.5 basis points. This event provides us with a unique opportunity to test empirically the impact of a Tax rate reduction on trading volume, bid-ask spreads, and price volatility. Intraday and daily time series data from May 1, 1999 to April 30, 2001 are tested in a three equation structural model. Our findings show that Transaction Taxes have a negative impact on trading volume and bid-ask spreads, as we find that trading volume increased and bid-ask spreads decreased in the period following the reduction in the Transaction Tax. Our analysis is not consistent with the argument that the imposition of a Transaction Tax may reduce price volatility, since there are no significant changes in price volatility after the Tax reduction. We further find that, although the reduction in the Transaction Tax did reduce Tax revenues, the proportional decrease in Tax revenues is less than the 50% reduction in the Tax rate. Finally, Tax revenues in the second and third year after the Tax reduction increased, as compared to the year before the Tax reduction.
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Transaction Tax and market quality of the Taiwan stock index futures
Journal of Futures Markets, 2006Co-Authors: Robin K. Chou, George H. K. WangAbstract:On May 1, 2000, the Taiwan government reduced the Tax levied on futures Transactions on the Taiwan Futures Exchange from 5 to 2.5 basis points. This event provides a unique opportunity to test empirically the impact of a Tax rate reduction on trading volume, bid-ask spreads, and price volatility. Intraday and daily time series data from May 1, 1999, through April 30, 2001, are tested in a three-equation structural model. Findings show that Transaction Taxes have a negative impact on trading volume and bid-ask spreads, as trading volume increased and bid-ask spreads decreased in the period following the reduction in the Transaction Tax. This study's analysis is not consistent with the argument that the imposition of a Transaction Tax may reduce price volatility because there are no significant changes in price volatility after the Tax reduction. Further, it was found that although the reduction in the Transaction Tax did reduce Tax revenues, the proportional decrease in Tax revenues is less than the 50% reduction in the Tax rate. Finally, Tax revenues in the second and third year after the Tax reduction increased, as compared to the year before the Tax reduction. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:1195–1216, 2006
Shouyang Wang - One of the best experts on this subject based on the ideXlab platform.
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Transaction Tax heterogeneous traders and market volatility
Kybernetes, 2015Co-Authors: L I Hongquan, Gang Cheng, Shouyang WangAbstract:Purpose – The securities Transaction Tax (STT) has been theoretically considered as an important regulation device for decades. However, its role and effectiveness in financial markets is still not well understood both theoretically and empirically. By use of agent-based modeling method, the purpose of this paper is to present a new artificial stock market model with self-adaptive agents, which allows the assessment of the impacts from various levels of STTs in distinctive market environments and thus a comprehensive understanding of the effects of STTs is achieved. Design/methodology/approach – In the model, agents are allowed to employ the strategies used by the following five types of investors: contrarians, random traders, momentum traders, fundamentalists and exit strategy holders. Specifically, the authors start with the investigation of the dynamics of a Tax free benchmark market; then the patterns of market behaviors and the behaviors of various types of investors are discussed with different leve...
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securities Transaction Tax and stock market behavior in an agent based financial market model
International Conference on Conceptual Structures, 2013Co-Authors: Mengyun Tang, Wei Shang, Shouyang WangAbstract:Abstract As highly related to the investors’ earnings expectations and trading decision-making behavior, securities Transaction Tax (STT) has long been regarded as a typical regulatory mechanism exploited by policy makers. However, neither theoretical analysis nor empirical studies reach consensus about the role and policy effect of the securities Transaction Tax. Within the framework of agent-based computational finance, this paper presents a new artificial stock market model with heterogeneous agents, which allows us to assess the impacts of varying STTs on market behavior to come to robust conclusions. First we investigate the dynamics of benchmark market with no Tax levied, and then market behaviors with different STTs are thoroughly checked. The results show that a modest Transactions Tax does contribute to stabilize markets by reducing market volatility, but its negative effects on market efficiency cannot be ignored at the same time. The findings suggest that regulatory authorities should introduce STT discreetly to strike a balance between stability and efficiency.
Jakob Von Weizsäcker - One of the best experts on this subject based on the ideXlab platform.
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financial Transaction Tax small is beautiful
Society and Economy, 2011Co-Authors: Zsolt Darvas, Jakob Von WeizsäckerAbstract:The case for Taxing financial Transactions merely to raise more revenues from the financial sector is not particularly strong. Better alternatives to Tax the financial sector are likely to be available. However, a Tax on financial Transactions could be justified in order to limit socially undesirable Transactions when more direct means of doing so are unavailable for political or practical reasons. Some financial Transactions are indeed likely to do more harm than good, especially when they contribute to the systemic risk of the financial system. However, such a financial Transaction Tax should be very small, much smaller than the negative externalities in question, because it is a blunt instrument that also drives out socially useful Transactions. There is a case for Taxing over-the-counter derivative Transactions at a somewhat higher rate than exchange-based derivative Transactions. More targeted remedies to drive out socially undesirable Transactions should be sought in parallel, which would allow, aft...
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Financial-Transaction Tax: Small Is Beautiful
2010Co-Authors: Zsolt Darvas, Jakob Von WeizsäckerAbstract:The case for Taxing financial Transactions merely to raise more revenues from the financial sector is not particularly strong. Better alternatives to Tax the financial sector are likely to be available. However, a Tax on financial Transactions could be justified in order to limit socially undesirable Transactions when more direct means of doing so are unavailable for political or practical reasons. Some financial Transactions are indeed likely to do more harm than good, especially when they contribute to the systemic risk of the financial system. However, such a financial Transaction Tax should be very small, much smaller than the negative externalities in question, because it is a blunt instrument that also drives out socially useful Transactions. There is a case for Taxing over-the-counter derivative Transactions at a somewhat higher rate than exchange-based derivative Transactions. More targeted remedies to drive out socially undesirable Transactions should be sought in parallel, which would allow, after their implementation, to reduce or even phase out financial Transaction Taxes.
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Financial-Transaction Tax: small is beautiful. Bruegel Policy Contribution 2010/02, February 2010
2010Co-Authors: Zsolt Darvas, Jakob Von WeizsäckerAbstract:Based on their contribution to the European Parliament Economic and Monetary Affairs Committee, in this Policy Contribution Resident Fellows Zsolt Darvas and Jakob von Weizsacker discuss the merits of the much-discussed financial-Transaction Tax. They argue that the case for Taxing financial Transactions for the sake of not raising revenue is relatively weak, but a financial-Transaction Tax could be useful in limiting socially-undesirable Transactions. On this basis, they say, a very small, coordinated Tax on financial Transactions could be implemented successfully.
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Financial-Transaction Tax- Small Is Beautiful
Policy Contributions, 2010Co-Authors: Zsolt Darvas, Jakob Von WeizsäckerAbstract:Based on their contribution to the European Parliament Economic and Monetary Affairs Committee, in this Policy Contribution Resident Fellows Zsolt Darvas and Jakob von Weizsacker discuss the merits of the much-discussed financial-Transaction Tax. They argue that the case for Taxing financial Transactions for the sake of not raising revenue is relatively weak, but a financial-Transaction Tax could be useful in limiting socially-undesirable Transactions. On this basis, they say, a very small, coordinated Tax on financial Transactions could be implemented successfully.A revised version of this paper was also published in Society and Economy Volume 33, Number 3/December 2011
Stephan Schulmeister - One of the best experts on this subject based on the ideXlab platform.
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implementation of a financial Transaction Tax by a group of eu member states estimation of relocation effects of the size and distribution of revenues and of the first mover advantage of the participating countries
WIFO Studies, 2013Co-Authors: Stephan Schulmeister, Eva SokollAbstract:The study investigates the effects of the implementation of the financial Transaction Tax (FTT) as conceptualised by the European Commission (EC) in a group of 11 EU countries. It is shown that the objections against this concept – recently put forward by Goldman Sachs and other banks heavily engaged in short-term trading – suffer from serious methodological flaws. Particular attention ist given to the potential use of London subsidiaries of financial institutions established in participating countries as vehicle for Tax evasion. If London subsidiaries are treated as part of their parent company, overall FTT revenues of the 11 FTT countries are estimated at 65.8 billion €, more than estimated by the EC for the EU 27 as a whole. Roughly one quarter of these revenues would stem from Transactions in North America and Asia. If London subsidiaries are treated as British financial institutions, Tax revenues would amount to only 28.3 billion €. This difference is particularly great for those countries which operate to a significant extent through big subsidiaries in London like Germany and France.
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the financial Transaction Tax boon or bane
Intereconomics, 2012Co-Authors: Dorothea Schäfer, John Vella, Stephan Schulmeister, Donato Masciandaro, Francesco Passarelli, Ross P. BuckleyAbstract:Against the backdrop of the debate over the introduction of a financial Transaction Tax (FTT) in the European Union, this Forum is dedicated to the discussion of issues concerning the implementation and impact of such a Tax on the financial sectors of the member states. Dorothea Schafer regards as the main policy goal of an FTT to be the prospect of slowing down the mutually reinforcing and growing trends of an increasing number of derivative products and shorter holding periods. The FTT can therefore make an important contribution to preventing the decoupling of financial markets from the real economy. The paper by Stephan Schulmeister discusses the essential features of a general FTT that will ensure that the more short-term oriented and riskier a Transaction is, the greater the effect of the FTT on Transaction costs. John Vella identifies some commonly made claims about an FTT which are of questionable foundation and compares the FTT with some alternative Taxes on the financial sector. Donato Masciandaro and Francesco Passarelli focus on how an FTT measure aimed at reducing financial systemic risk can cause political distortions, leading to inefficient and ineffective policies. Finally, the paper by Ross Buckley analyses common myths, inaccuracies and untruths about the EU’s proposed FTT.
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The financial Transaction Tax — Boon or bane?
Intereconomics, 2012Co-Authors: Dorothea Schäfer, John Vella, Stephan Schulmeister, Donato Masciandaro, Francesco Passarelli, Ross P. BuckleyAbstract:Against the backdrop of the debate over the introduction of a financial Transaction Tax (FTT) in the European Union, this Forum is dedicated to the discussion of issues concerning the implementation and impact of such a Tax on the financial sectors of the member states. Dorothea Schäfer regards as the main policy goal of an FTT to be the prospect of slowing down the mutually reinforcing and growing trends of an increasing number of derivative products and shorter holding periods. The FTT can therefore make an important contribution to preventing the decoupling of financial markets from the real economy. The paper by Stephan Schulmeister discusses the essential features of a general FTT that will ensure that the more short-term oriented and riskier a Transaction is, the greater the effect of the FTT on Transaction costs. John Vella identifies some commonly made claims about an FTT which are of questionable foundation and compares the FTT with some alternative Taxes on the financial sector. Donato Masciandaro and Francesco Passarelli focus on how an FTT measure aimed at reducing financial systemic risk can cause political distortions, leading to inefficient and ineffective policies. Finally, the paper by Ross Buckley analyses common myths, inaccuracies and untruths about the EU’s proposed FTT.
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asset price fluctuations financial crises and the stabilizing effects of a general Transaction Tax
Chapters in SUERF Studies, 2010Co-Authors: Stephan SchulmeisterAbstract:The deepening of the recent crisis was driven by the simultaneous devaluation of stock wealth, housing wealth and commodity wealth. The potential for this devaluation process had been "built up" during the boom of stock prices, house prices and commodity prices between 2003 and 2007. Hence, this paper sketches the main causes and effects of long swings in asset prices in the context of the current crisis. It is shown that "bull markets" are brought about by upward price runs (i.e., monotonic movements) lasting longer than counter-movements for an extended period of time (and vice versa for "bear markets"). This pattern of asset price dynamics is the result of "trading as usual" on (highly regulated) derivatives exchanges. The most popular trading practices like "technical analysis" contribute significantly to asset price overshooting. These practices strengthened both, the boom of asset prices until mid 2007 as well as their collapse in recent months. A general financial Transaction Tax would limit the wide fluctuations of stock prices, exchange rates and commodity prices. (This abstract was borrowed from another version of this item.)
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A General Financial Transaction Tax: The Concept, its Justification and Effects
2009Co-Authors: Stephan SchulmeisterAbstract:Initially this paper outlines the concept of a Tax on all Transactions to do with financial assets. It summarises the main arguments for and against such a Tax. The next part documents the relevant empirical evidence necessary to be able to evaluate the arguments. In particular the development of financial Transactions is documented, as well as the dynamic of exchange rates, raw material prices and share prices. The data would suggest that the introduction of a financial Transaction Tax would reduce the instability of such prices. Indeed it would reduce not only its short term volatility but also the longer term upwards and downwards trends ("bull markets" and "bear markets"). Finally the potential revenue of a Transaction Tax is estimated for three different rates of Tax (0,1 percent, 0,05 percent and 0,01 percent). Due to the high trading volumes on the financial markets the revenue from such a Tax would be considerable: with a Tax rate of 0.05 percent the revenues in Germany were between 0.7 percent and 1.5 percent of GDP and in Europe between 0.9 percent and 2.1 percent.