Is a transactions tax an effective means to stabilize the foreign exchange market?
The desirability of a transactions tax in the foreign exchange market, or Tobintax, depends on whether the tax deters short-term, destabilizing trade. While supporters claim that the tax would be a deterrent for short-term capital flows, critics contend that the deterrent capability of the tax would...
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| Format: | Article |
| Language: | English |
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Associazione Economia civile
2003-12-01
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| Series: | PSL Quarterly Review |
| Subjects: | |
| Online Access: | http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9819/9704 |
| _version_ | 1818357899407130624 |
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| author | Andrea Terzi |
| author_facet | Andrea Terzi |
| author_sort | Andrea Terzi |
| collection | DOAJ |
| description | The desirability of a transactions tax in the foreign exchange market, or Tobintax, depends on whether the tax deters short-term, destabilizing trade. While supporters claim that the tax would be a deterrent for short-term capital flows, critics contend that the deterrent capability of the tax would be limited. This paper attempts to resolve some lingering questions about the arithmetic of a transactions tax, and concludes that a tax would raise the required return from trade for any time horizon, and thus deter all trades driven by small expected capital gains (i.e., smaller than the square of one plus the tax rate), and not necessarily those driven by a short horizon of the investor. The paper then explores the consequences of this result on the effectiveness of the tax within competing paradigms and concludes that a Tobin tax is not likely to be an effective means to reach the declared objectives. |
| first_indexed | 2024-12-13T20:20:26Z |
| format | Article |
| id | doaj.art-91509442f053493bbb71f96727407b19 |
| institution | Directory Open Access Journal |
| issn | 2037-3635 2037-3643 |
| language | English |
| last_indexed | 2024-12-13T20:20:26Z |
| publishDate | 2003-12-01 |
| publisher | Associazione Economia civile |
| record_format | Article |
| series | PSL Quarterly Review |
| spelling | doaj.art-91509442f053493bbb71f96727407b192022-12-21T23:32:42ZengAssociazione Economia civilePSL Quarterly Review2037-36352037-36432003-12-0156227367385Is a transactions tax an effective means to stabilize the foreign exchange market?Andrea TerziThe desirability of a transactions tax in the foreign exchange market, or Tobintax, depends on whether the tax deters short-term, destabilizing trade. While supporters claim that the tax would be a deterrent for short-term capital flows, critics contend that the deterrent capability of the tax would be limited. This paper attempts to resolve some lingering questions about the arithmetic of a transactions tax, and concludes that a tax would raise the required return from trade for any time horizon, and thus deter all trades driven by small expected capital gains (i.e., smaller than the square of one plus the tax rate), and not necessarily those driven by a short horizon of the investor. The paper then explores the consequences of this result on the effectiveness of the tax within competing paradigms and concludes that a Tobin tax is not likely to be an effective means to reach the declared objectives.http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9819/9704Foreign Exchange |
| spellingShingle | Andrea Terzi Is a transactions tax an effective means to stabilize the foreign exchange market? PSL Quarterly Review Foreign Exchange |
| title | Is a transactions tax an effective means to stabilize the foreign exchange market? |
| title_full | Is a transactions tax an effective means to stabilize the foreign exchange market? |
| title_fullStr | Is a transactions tax an effective means to stabilize the foreign exchange market? |
| title_full_unstemmed | Is a transactions tax an effective means to stabilize the foreign exchange market? |
| title_short | Is a transactions tax an effective means to stabilize the foreign exchange market? |
| title_sort | is a transactions tax an effective means to stabilize the foreign exchange market |
| topic | Foreign Exchange |
| url | http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9819/9704 |
| work_keys_str_mv | AT andreaterzi isatransactionstaxaneffectivemeanstostabilizetheforeignexchangemarket |