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The Tobin Tax: A Mean-Variance Approach

Author

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  • Bruno Bosco
  • Alessandro Santoro

Abstract

A Tobin tax (TT) is studied by means of a portfolio model defined over the means and variances of two rates of return (domestic and foreign). When the correlation is negative, the TT is likely to decrease the speculative component of the share of portfolio invested abroad and to increase the hedging component. For a TT to decrease both the components of the share, one needs not only a small expected gain from speculation, but also either a high positive correlation between the two rates of return or a sufficiently large value of the coefficient of variation of the foreign rate.

Suggested Citation

  • Bruno Bosco & Alessandro Santoro, 2004. "The Tobin Tax: A Mean-Variance Approach," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(3), pages 446-459, September.
  • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200409)60:3_446:tttama_2.0.tx_2-u
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    Citations

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    Cited by:

    1. Olivier Damette, 2009. "Exchange rate volatility and noise traders: Currency Transaction Tax as an eviction device," Economics Bulletin, AccessEcon, vol. 29(3), pages 2449-2464.

    More about this item

    Keywords

    Tobin tax; portfolio analysis; currency speculation;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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