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A Note on the Tobin Tax

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  • Korkut Erturk

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.

Suggested Citation

  • Korkut Erturk, "undated". "A Note on the Tobin Tax," Working Paper Series, Department of Economics, University of Utah 2003_05, University of Utah, Department of Economics.
    • Handle: RePEc:uta:papers:2003_05
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    References listed on IDEAS

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    More about this item

    Keywords

    Transaction tax; speculation; finance;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals

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