|| PhDr. Jiří Kukačka Ph.D., Filip Staněk|
||IES Working Papers
|ISSN / ISBN:
||IES Working Papers 26/2015, published in CompEcon
||Tobin tax, foreign exchange market, agent-based modeling, Walrasian auctioneer
||C63, D84, F31, G18
||Stanek F., Kukacka J. (2015). The impact of the Tobin tax in a heterogeneous agent model of the foreign exchange market. IES Working Paper 26/2015. IES FSV Charles University.
|| DYME – Dynamic Models in Economics
GAUK 588912 - Empirical Validation of Heterogeneous Agent Models
SVV 260 233 - Intensification of Doctoral Research in Economics and Finance: Heterogeneity in Alternative Approaches to Economic Modeling
||We explore possible effects of a Tobin tax on exchange rate dynamics in a heterogeneous agent model. To assess the impact of the Tobin tax in this framework, we extend the model of De Grauwe and Grimaldi (2006) by including transaction costs and perform numerical simulations. Motivated by the importance of the market microstructure, we choose to model the market as being cleared by a Walrasian auctioneer. This setting could more closely resemble the two-layered structure of foreign exchanges at daily frequency than a price impact function, which is often adopted in similar studies. We find that the Tobin tax can deliver a moderate reduction of return volatility and kurtosis. In addition, simulations indicate that the Tobin tax reduces the degree of mispricing in the time series, which is primarily achieved by eliminating long-lasting deviations from the fundamental value.