Securities Transaction Taxes and Financial Markets

Author/Editor:

Karl F Habermeier ; Andrei A Kirilenko

Publication Date:

May 1, 2001

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper argues that securities transaction taxes "throw sand" not in the wheels, but into the engine of financial markets where the transformation of latent demands into realized transactions takes place. The paper considers the impact of transaction taxes on financial markets in the context of four questions. How important is trading? What causes price volatility? How are prices formed? How valuable is the volume of transactions? The paper concludes that transaction taxes or such equivalents as capital controls can have negative effects on price discovery, volatility, and liquidity and lead to a reduction in the informational efficiency of markets.

Series:

Working Paper No. 01/51

Subject:

English

Publication Date:

May 1, 2001

ISBN/ISSN:

9781451847116/1018-5941

Stock No:

WPIEA0512001

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

30

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