A Note on the Tobin Tax

Korkut Erturk

Working Paper Series, Department of Economics, University of Utah from University of Utah, Department of Economics

Abstract: This paper clarifies why a transaction tax of the type proposed by James Tobin can have stabilizing influence in financial markets. It argues that such a tax is potentially stabilizing, not because it reduces the 'excessive' volume of transactions, but because it can slow the speed with which market traders react to price changes. To the extent that a Tobin tax causes financial market traders to delay their decisions a few "grains of sand in the wheels of international finance" can indeed be stabilizing. Whether or not that is sufficient to prevent speculative attacks on currencies is, however, a different matter.

Keywords: Transaction tax; speculation; finance (search for similar items in EconPapers)
JEL-codes: B31 F30 (search for similar items in EconPapers)
Pages: 14 pages
New Economics Papers: this item is included in nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:uta:papers:2003_05

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