Coping with, and Cashing in on, International Capital Volatility

The volatility of international capital flows and the incidence of international financial crises have led to calls for the existing international financial architecture to be reformed. But how? One idea that has been around since the 1970s is that a tax should be levied on international currency transactions. Would such a tax reduce capital volatility and help avoid currency crises, or would it prove ineffective and infeasible? The political economy of currency taxation suggests that the idea will receive more support if it can be shown to make a significant contribution to offsetting the perceived inefficiencies of private international capital markets.