Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Intelligent transaction tax could help reduce systemic risk in financial networks

11.04.2016

A new study proposes a solution for mitigating the increasingly risky nature of financial markets, based on an analysis of systemic risk in financial networks.

A tax on individual transactions between financial institutions—based on the level of systemic risk that each transaction adds to the system—could essentially eliminate the risk of future collapse of the financial system, according to a new study recently published in the journal Quantitative Finance. It relies on an analysis of the networks of the banking system, using central bank data from Austria.

“When banks collapse, it costs a lot to bail them out, and that money usually comes from the public, from taxpayers” explains IIASA researcher Stefan Thurner, who coauthored the study with IIASA researcher Sebastian Poledna. The proposed tax would go into a government fund which could be used to bail out a struggling bank, for example. “You could also consider it a form of systemic risk insurance,” says Thurner.

Financial institutions are linked by multiple types of transactions, which Thurner and Poledna have modeled in a detailed network analysis. These transactions include deposits and loans between financial institutions. The study is the first to quantify the systemic risk that individual transactions add to the system.

‘’Since the international financial crisis in 2007 and 2008, policymakers have been discussing new ways to regulate the system in order to help avoid a repeat scenario.

The new study provides just that,” says Poledna. While introducing such a tax would require some work, the researchers argue that the data are there and the technical effort required for implementation is not overwhelming. Thurner has already presented the work to interested policymakers, supervisors, and central banks in the EU and Mexico.

“There’s currently a lot of discussion about a Tobin tax in the European Union, but the version they are proposing would tax every transaction at a flat rate. The tax we are proposing would not have to be large, in order to act as an incentive scheme for avoiding transactions that would be the most harmful for the system—banks would try to avoid transactions that generate that risk,” says Thurner.

Reference
Poledna S, Thurner S (2016). Elimination of systemic risk in financial networks by means of a systemic risk transaction tax. Quantitative Finance doi:10.1080/14697688.2016.1156146

Weitere Informationen:

http://www.iiasa.ac.at/web/home/about/news/160411-systemic-risk.html
http://www.tandfonline.com/doi/full/10.1080/14697688.2016.1156146

MSc Katherine Leitzell | idw - Informationsdienst Wissenschaft

More articles from Business and Finance:

nachricht Mathematical confirmation: Rewiring financial networks reduces systemic risk
22.06.2017 | International Institute for Applied Systems Analysis (IIASA)

nachricht Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Abrupt motion sharpens x-ray pulses

Spectrally narrow x-ray pulses may be “sharpened” by purely mechanical means. This sounds surprisingly, but a team of theoretical and experimental physicists developed and realized such a method. It is based on fast motions, precisely synchronized with the pulses, of a target interacting with the x-ray light. Thereby, photons are redistributed within the x-ray pulse to the desired spectral region.

A team of theoretical physicists from the MPI for Nuclear Physics (MPIK) in Heidelberg has developed a novel method to intensify the spectrally broad x-ray...

Im Focus: Physicists Design Ultrafocused Pulses

Physicists working with researcher Oriol Romero-Isart devised a new simple scheme to theoretically generate arbitrarily short and focused electromagnetic fields. This new tool could be used for precise sensing and in microscopy.

Microwaves, heat radiation, light and X-radiation are examples for electromagnetic waves. Many applications require to focus the electromagnetic fields to...

Im Focus: Carbon Nanotubes Turn Electrical Current into Light-emitting Quasi-particles

Strong light-matter coupling in these semiconducting tubes may hold the key to electrically pumped lasers

Light-matter quasi-particles can be generated electrically in semiconducting carbon nanotubes. Material scientists and physicists from Heidelberg University...

Im Focus: Flexible proximity sensor creates smart surfaces

Fraunhofer IPA has developed a proximity sensor made from silicone and carbon nanotubes (CNT) which detects objects and determines their position. The materials and printing process used mean that the sensor is extremely flexible, economical and can be used for large surfaces. Industry and research partners can use and further develop this innovation straight away.

At first glance, the proximity sensor appears to be nothing special: a thin, elastic layer of silicone onto which black square surfaces are printed, but these...

Im Focus: 3-D scanning with water

3-D shape acquisition using water displacement as the shape sensor for the reconstruction of complex objects

A global team of computer scientists and engineers have developed an innovative technique that more completely reconstructs challenging 3D objects. An ancient...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Clash of Realities 2017: Registration now open. International Conference at TH Köln

26.07.2017 | Event News

Closing the Sustainability Circle: Protection of Food with Biobased Materials

21.07.2017 | Event News

»We are bringing Additive Manufacturing to SMEs«

19.07.2017 | Event News

 
Latest News

Characteristics of metabolically unhealthy lean people

02.08.2017 | Life Sciences

Magnon circular birefringence: Polarization rotation of spin waves and its applications

01.08.2017 | Physics and Astronomy

Innovative Infrared Emitters Optimize the Manufacture of Vehicle Interior Fittings Using Vacuum Lamination

01.08.2017 | Trade Fair News

VideoLinks
B2B-VideoLinks
More VideoLinks >>>