Securities Transaction Taxes and Financial Markets

By Karl F Habermeier, Andrei A Kirilenko

May 1, 2001

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Format: Chicago

Karl F Habermeier, and Andrei A Kirilenko. Securities Transaction Taxes and Financial Markets, (USA: International Monetary Fund, 2001) accessed December 21, 2024

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.

Subject: Asset prices, Balance of payments, Capital controls, Financial institutions, Options, Prices, Stocks, Taxes, Transaction tax

Keywords: Asset prices, Capital controls, Derivative transaction, Equity trading, Informational efficiency, Market liquidity, Market microstructure study, Market participant, North America, Options, Price discovery, Round-trip transaction, Securities transaction tax, Securities transaction taxes, Stocks, Transaction price volatility, Transaction tax, Transaction volume, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2001/051
Stock No:

WPIEA0512001
ISBN:

9781451847116
ISSN:

1018-5941

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