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Tobin Tax and Volatility : A Threshold Quantile Autoregressive Regression Framework

Abstract : From an original data set on the euro–dollar and on the won–dollar currency pairs (2008–2010), we conduct a threshold quantile autoregressive model to explain the role of a Tobin tax (TT) on the exchange rate volatility, taking into account two types of nonlinearity (regimes and quantiles). We find evidence that the impact of a TT would not be monotonic. A TT may be a good instrument to stabilize foreign exchange volatility only in normal times and/or in efficient markets. In contrast, a TT could be counterproductive in turbulent periods by increasing the volatility. In addition, by comparing a major currency pair (euro/dollar) and a minor currency pair (won/dollar), it appears that the potential stabilizing effect of a TT would be more clear-cut in the low volatility regime of a major currency pair, similar to the euro/dollar. Our results do not corroborate the previous studies that derived a monotonic and positive impact of a TT on volatility.
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https://hal.univ-lorraine.fr/hal-01738632
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Submitted on : Tuesday, March 20, 2018 - 4:26:07 PM
Last modification on : Monday, March 21, 2022 - 6:12:04 PM

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Olivier Damette, Beum-Jo Park. Tobin Tax and Volatility : A Threshold Quantile Autoregressive Regression Framework. Review of International Economics, 2015, 23 (5), pp.996 - 1022. ⟨10.1111/roie.12193⟩. ⟨hal-01738632⟩

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