Access the full text.
Sign up today, get DeepDyve free for 14 days.
Loading next page...
/lp/world-scientific-publishing-company/the-impact-of-commodity-transaction-tax-on-futures-trading-in-india-an-OoJbQkxhR0
References
References for this paper are not available at this time. We will be adding them shortly, thank you for your patience.
- Publisher
- World Scientific Publishing Company
- Copyright
- Copyright ©
- ISSN
- 0217-5908
- eISSN
- 1793-6837
- DOI
- 10.1142/S0217590811004328
- Publisher site
- See Article on Publisher Site
Abstract
Trading in commodity derivatives on exchange platforms is an instrument to achieve price discovery and better price-risk management besides helping the macroeconomy with better resource allocation. In the 2008–2009 budget, the Indian government proposed to impose a commodity transaction tax (CTT) amounting to 0.017% of trading value. In this context, we examine the relationship between trading activity, volatility and transaction cost for five most traded commodities in India. Results suggest that there exists a negative relationship between transaction cost and liquidity and a positive relationship between transaction cost and volatility. Further, the results of structural model support the results of VAR analysis. Therefore, if the government imposes CTT, it would lead to higher volatility and lower trading activity affecting market efficiency and liquidity.
Journal
The Singapore Economic Review – World Scientific Publishing Company
Published: Aug 1, 2011
Keywords: Commodity transaction tax futures market liquidity volatility