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Tackling Instability in Financial Markets with a Panic Tax

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  • Neil McCulloch

Abstract

The motivation for much recent debate on introducing a financial transaction or ‘Tobin’ Tax is to generate revenues for public goods – this is the main aim of the ‘Robin Hood Tax’ campaign. But James Tobin first proposed his idea in order to enhance market stability. The evidence suggests that a Tobin Tax might not reduce instability. However, a Panic Tax – a simple mechanism to tax panic rather than trade – could promote stability by dampening crashes and booms and providing policy space for more orderly adjustments in the financial markets.

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  • Neil McCulloch, 2011. "Tackling Instability in Financial Markets with a Panic Tax," IDS Bulletin, Blackwell Publishing, vol. 42(5), pages 109-113, September.
    • Handle: RePEc:wly:idsxxx:v:42:y:2011:i:5:p:109-113
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    File URL: http://hdl.handle.net/10.1111/idsb.2011.42.issue-5
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