Advanced Search
MyIDEAS: Login to save this paper or follow this series

Taxing short-term capital flows - An option for transition economies?

Contents:

Author Info

  • Buch, Claudia M.
  • Heinrich, Ralph P.
  • Pierdzioch, Christian

Abstract

This paper discusses whether the implementation of a tax on short-term capital flows can make the transition economies of Central and Eastern Europe less vulnerable to adverse external shocks and to sudden withdrawals of foreign capital. The following section outlines the main arguments which are advanced by the supporters and opponents of a transactions tax on foreign capital flows. We also develop a simple theoretical framework which allows us to study the effects of a tax on capital inflows. The model reveals that it is important to distinguish between two effects of a transactions tax. On the one hand, a transactions tax might be a useful tool to discourage destabilizing trading strategies on the foreign exchange market. On the other hand, it should be taken into account that a tax on foreign capital flows pushes the economy to a new steady state. This induces an overshooting of the exchange rate if super efficient financial markets react faster than goods markets. Thus, the implementation of a transactions tax by itself can be viewed as a source of additional (excess) volatility of the exchange rate. Section 3 briefly discusses the experience of Chile which maintains a deposit requirement for short-term capital inflows. Section 4 gives an account of the structure of capital flows of the transition economies and of the restrictions which currently pertain to the capital account of the balance of payments. We restrict our analysis to four of the more advanced reform countries – i.e., the Czech Republic, Estonia, Hungary, and Poland – because the policy issues of high capital inflows are most relevant for these countries. Section 5 concludes. -- Die Währungskrise, die in den letzten Monaten Asien erschütterte, zeigte einmal mehr, wie riskant es sein kann, aufstrebende Marktwirtschaften in den internationalen Markt mit einzubeziehen. Der vorliegende Diskussionsbeitrag befaßt sich mit der Frage, ob es sinnvoll wäre, den Kapitalzufluß in Transformationsländer durch Steuern zu regeln. Anhand von Grafiken und Tabellen werden die Entwicklung und der Verlauf von Finanzströmen verdeutlicht.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://econstor.eu/bitstream/10419/54200/1/673072541.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Kiel Institute for the World Economy (IfW) in its series Kiel Discussion Papers with number 321.

as in new window
Length:
Date of creation: 1998
Date of revision:
Handle: RePEc:zbw:ifwkdp:321

Contact details of provider:
Postal: Kiellinie 66, D-24105 Kiel
Phone: +49 431 8814-1
Fax: +49 431 8814528
Email:
Web page: http://www.ifw-kiel.de/
More information through EDIRC

Related research

Keywords:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. John V. Leahy & Toni M. Whited, 1995. "The Effect of Uncertainty on Investment: Some Stylized Facts," NBER Working Papers 4986, National Bureau of Economic Research, Inc.
  2. Barry Eichengreen, James Tobin, and Charles Wyplosz., 1994. "Two Cases for Sand in the Wheels of International Finance," Center for International and Development Economics Research (CIDER) Working Papers, University of California at Berkeley C94-045, University of California at Berkeley.
  3. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(4), pages 703-38, August.
  4. Episcopos, Athanasios, 1995. "Evidence on the relationship between uncertainty and irreversible investment," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 35(1), pages 41-52.
  5. Diehl, Markus & Schweickert, Rainer, 1998. "Currency crises: is Asia different?," Kiel Discussion Papers 309, Kiel Institute for the World Economy (IfW).
  6. Kaminsky, Graciela L & Reinhart, Carmen M, 1998. "Financial Crises in Asia and Latin America: Then and Now," American Economic Review, American Economic Association, American Economic Association, vol. 88(2), pages 444-48, May.
  7. Garber, Peter & Taylor, Mark P, 1995. "Sand in the Wheels of Foreign Exchange Markets: A Sceptical Note," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 105(428), pages 173-80, January.
  8. Leonardo Bartolini & Allan Drazen, 1996. "Capital Account Liberalization as a Signal," NBER Working Papers 5725, National Bureau of Economic Research, Inc.
  9. Buch, Claudia M. & Heinrich, Ralph P. & Piazolo, Daniel, 1998. "Southern enlargement of the European Union and capital account liberalization: Lessons for Central and Eastern Europe," Kiel Working Papers 871, Kiel Institute for the World Economy.
  10. Buch, Claudia M. & Heinrich, Ralph P. & Pierdzioch, Christian, 1999. "The Value of Waiting: Russia's Integration into the International Capital Markets," Journal of Comparative Economics, Elsevier, vol. 27(2), pages 209-230, June.
  11. Van Wijnbergen, Sweder, 1985. "Trade reform, aggregate investment and capital flight : On credibility and the value of information," Economics Letters, Elsevier, Elsevier, vol. 19(4), pages 369-372.
  12. Evzen Kocenda, 1998. "Altered bank and exchange volatility," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 6(1), pages 173-181, 05.
  13. Tornell, Aaron, 1990. "Real vs. financial investment can Tobin taxes eliminate the irreversibility distortion?," Journal of Development Economics, Elsevier, Elsevier, vol. 32(2), pages 419-444, April.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Sell, Friedrich L., 2004. "Währungspolitik im Dienste von Entwicklung : Immer noch ein Forschungsprogramm!," Working Papers in Economics 2004,2, Universität der Bundeswehr München, Economic Research Group.
  2. Nunnenkamp, Peter, 2000. "Boom, bust, recovery - what next in private capital flows to emerging markets?," Kiel Discussion Papers 362, Kiel Institute for the World Economy (IfW).
  3. Buch, Claudia M. & Heinrich, Ralph P. & Pierdzioch, Christian, 2001. "Globalisierung der Finanzmärkte: Freier Kapitalverkehr oder Tobin-Steuer?," Kiel Discussion Papers 381, Kiel Institute for the World Economy (IfW).
  4. Nunnenkamp, Peter, 1998. "Wirtschaftliche Aufholprozesse und Globalisierungskrisen in Entwicklungsländern : Implikationen für die nationale Wirtschaftspolitik und den globalen Ordnungsrahmen," Kiel Discussion Papers 328, Kiel Institute for the World Economy (IfW).
  5. M. Frenkel & G. Shimidt & G. Stadtmann & Nickle Christiane, 2002. "The Effects of Capital Controls on Exchange Rate Volatility and Output," International Economic Journal, Taylor & Francis Journals, Taylor & Francis Journals, vol. 16(4), pages 27-51.
  6. Buch, Claudia M., 1999. "Chilean-type capital controls: A building block of the new international financial architecture?," Kiel Discussion Papers 350, Kiel Institute for the World Economy (IfW).
  7. Gustavo Abarca & Claudia Ramírez & José Gonzalo Rangel, 2012. "Capital Controls and Exchange Rate Expectations in Emerging Markets," Working Papers, Banco de México 2012-08, Banco de México.
  8. Peter Nunnenkamp, 2001. "Liberalization and Regulation of International Capital Flows: Where the Opposites Meet," Kiel Working Papers 1029, Kiel Institute for the World Economy.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:zbw:ifwkdp:321. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.