Journal of Evolutionary Economics

, Volume 13, Issue 1, pp 53–70 | Cite as

Heterogeneous traders and the Tobin tax

  • Frank Westerhoff
Original paper


To study the effectiveness of the Tobin tax, we develop a model of heterogeneous interacting agents. Traders either speculate on the basis of technical or fundamental analysis, or abstain from the market, a decision which depends on profit considerations, as well as communication between agents. Simulations generate stylized facts such as unit roots in exchange rates, fat tails for returns, or volatility clustering. The imposition of a Tobin tax leads to a crowding out of speculators and stabilizes the dynamics. However, the decreasing impact of fundamentalists triggers misalignments if tax rates are too high.

Key words: Foreign exchange markets – Tobin tax – Technical and fundamental analysis 
JEL Classification: F31, G14 


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Copyright information

© Springer-Verlag Berlin Heidelberg 2003

Authors and Affiliations

  • Frank Westerhoff
    • 1
  1. 1.University of Osnabrück, Department of Economics, Rolandstrasse 8, 49069 Osnabrück, Germany (e-mail: DE

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