Speculative asset price dynamics and wealth taxes

Artikel

Based on the seminal asset-pricing model by Brock and Hommes (J Econ Dyn Control 22:1235–1274, 1998), we analytically show that higher wealth taxes increase the risky asset’s fundamental value, enlarge its local stability domain, may prevent the birth of nonfundamental steady states and, if they exist, reduce the risky asset’s mispricing. We furthermore find that higher wealth taxes may hinder the emergence of endogenous asset price oscillations and, if they exist, dampen their amplitudes. Since oscillatory price dynamics may be associated with lower mispricing than locally stable nonfundamental steady states, policymakers may not always want to suppress them by imposing (too low) wealth taxes. Overall, however, our study suggests that wealth taxes tend to stabilize the dynamics of financial markets.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Decisions in Economics and Finance ; ISSN: 1129-6569 ; Volume: 44 ; Year: 2021 ; Issue: 2 ; Pages: 641-667 ; Cham: Springer International Publishing

Classification and Topics

• Classification: Wirtschaft ; Expectations; Speculations ; Asset Pricing; Trading Volume; Bond Interest Rates ; General Financial Markets: Government Policy and Regulation ; Behavioral Finance: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets‡
• Subject: Asset price dynamics ; Wealth taxes ; Heterogeneous expectations ; Nonlinear dynamics ; Stability and bifurcation analysis

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mignot, Sarah ; Tramontana, Fabio ; Westerhoff, Frank
• Event: Veröffentlichung
• (who): Springer International Publishing
• (where): Cham
• (when): 2021

Further information

• DOI: doi:10.1007/s10203-021-00340-z
• Last update: 10.03.2025, 11:41 AM CET