Speculative asset price dynamics and wealth taxes

Faculty/Professorship: Economic Policy  
Author(s): Mignot, Sarah; Tramontana, Fabio; Westerhoff, Frank H.  
Publisher Information: Bamberg : Otto-Friedrich-Universität
Year of publication: 2022
Pages: 641-667
Source/Other editions: Decisions in economics and finance : a journal of applied mathematics, 44 (2021), 2, S. 641-667 - ISSN: 1593-8883
is version of: 10.1007/s10203-021-00340-z
Year of first publication: 2022
Language(s): English
Licence: Creative Commons - CC BY - Attribution 4.0 International 
URN: urn:nbn:de:bvb:473-irb-548351
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.
GND Keywords: Vermögensentwicklung; Preisentwicklung; Vermögensteuer; Erwartungswert; Nichtlineare Dynamik
Keywords: Asset price dynamics, Wealth taxes, Heterogeneous expectations, Nonlinear dynamics, Stability and bifurcation analysis
DDC Classification: 330 Economics  
RVK Classification: QX 200     QH 234   
Type: Article
URI: https://fis.uni-bamberg.de/handle/uniba/54835
Release Date: 8. August 2022

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