IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Should we throw sand in the gears of financial markets?

Listed author(s):
  • Craig S. Hakkio

The volatility of financial markets in recent years has led to increased concern. As trading of financial assets on organized exchanges and over-the-counter markets has grown, events such as the 1987 stock market crash and the 1992 Exchange Rate Mechanism crisis in Europe have raised fundamental questions about the role these markets play in the economy. In particular, there is concern that much of the increased trading of financial assets is of a short-term, speculative nature that adds little value to the intermediation process and in the extreme case may distort the efficient functioning of financial markets.> This view has led some economists to advocate a securities transaction tax. Such a tax, it is argued, when applied to a broad range of financial transactions, would raise the cost of short-term speculative trading, reduce financial market volatility, and improve the efficiency of financial markets. This type of tax might also raise substantial revenue that could help reduce the federal budget deficit. The revenue potential has not gone unnoticed in Washington, where recent budget proposals by both the Bush and Clinton administrations have included an STT.> Hakkio explores the pros and cons of a securities transaction tax. He concludes that the proponents have overstated the likely benefits of a securities transaction tax and underestimated the potential costs.

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:
Download Restriction: no

Article provided by Federal Reserve Bank of Kansas City in its journal Economic Review.

Volume (Year): (1994)
Issue (Month): Q II ()
Pages: 17-30

in new window

Handle: RePEc:fip:fedker:y:1994:i:qii:p:17-30:n:v.79no.2
Contact details of provider: Postal:
One Memorial Drive, Kansas City, MO 64198

Phone: (816) 881-2254
Web page:

More information through EDIRC

Order Information: Email:

No references listed on IDEAS
You can help add them by filling out this form.

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

When requesting a correction, please mention this item's handle: RePEc:fip:fedker:y:1994:i:qii:p:17-30:n:v.79no.2. 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: (LDayrit)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.