Market microstructure matters when imposing a Tobin tax-Evidence from the lab.
TRADING IN FX MARKETS IS DOMINATED BY TWO MICROSTRUCTURES: exchanges with market makers and OTC-markets without market makers. Using laboratory experiments we test whether the impact of a Tobin tax is different in these two market microstructures. We find that (i) in markets without market makers an unilaterally imposed Tobin tax (i.e. a tax haven exists) increases volatility. (ii) In contrast, in markets with market makers we observe a decrease in volatility in unilaterally taxed markets. (iii) An encompassing Tobin tax has no impact on volatility in either setting. Efficiency does not vary significantly across tax regimes.
University of Innsbruck, Department of Banking and Finance, Universitätsstrasse 15, 6020 Innsbruck, Austria.
Michael
M
Kirchler
Jürgen
J
Huber
Daniel
D
Kleinlercher