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Securities Transaction Taxes and Financial Markets

30 Pages Posted: 11 Aug 2009  

Karl Friedrich Habermeier

affiliation not provided to SSRN

Andrei A. Kirilenko

Imperial College London - Centre for Global Finance and Technology

Date Written: May 2001

Abstract

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.

Keywords: Taxes, Bonds, Capital markets, Capital controls

Suggested Citation

Habermeier, Karl Friedrich and Kirilenko, Andrei A., Securities Transaction Taxes and Financial Markets (May 2001). IMF Working Papers, Vol. , pp. 1-29, 2001. Available at SSRN: https://ssrn.com/abstract=1445785

Karl Friedrich Habermeier (Contact Author)

affiliation not provided to SSRN

No Address Available

Andrei A. Kirilenko

Imperial College London - Centre for Global Finance and Technology ( email )

South Kensington Campus
London, SW7 2AZ
United Kingdom

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