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Financial Transactions Taxes


  • Janet Gale Stotsky
  • Parthasarathi Shome


Financial transactions taxes have recently gained attention as a possible means to influence the behavior of financial markets and to reduce destabilizing capital flows. One variation is a tax on all foreign currency conversions, often termed a “Tobin tax.” This paper suggests that these taxes would probably not produce the desired effects and would be difficult to design and implement. It is unclear that the possible advantages in reducing some short-term speculative trading would outweigh the possible disadvantages in impairing the efficiency of financial markets. From an administrative perspective, without a broad international consensus and application, these taxes are likely to be easily avoided.

Suggested Citation

  • Janet Gale Stotsky & Parthasarathi Shome, 1995. "Financial Transactions Taxes," IMF Working Papers 95/77, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:95/77

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    References listed on IDEAS

    1. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-586, June.
    2. J. Caprio & P. Honohan, 2000. "Restoring Banking Stability: Beyond Supervised Capital Requirements," South African Journal of Economics, Economic Society of South Africa, vol. 68(1), pages 5-22, March.
    3. Muller, P. & M. Zelmer, 1999. "Greater Transparency in Monetary Policy: Impact on Financial Markets," Technical Reports 86, Bank of Canada.
    4. Kenneth Rogoff, 1999. "International Institutions for Reducing Global Financial Instability," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 21-42, Fall.
    5. Tarkka, Juha & Mayes, David, 1999. "The value of publishing official central bank forecasts," Research Discussion Papers 22/1999, Bank of Finland.
    6. William F. Treacy & Mark S. Carey, 1998. "Credit risk rating at large U.S. banks," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Nov, pages 897-921.
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    Cited by:

    1. Jeffrey Frankel., 1995. "How Well Do Foreign Exchange Markets Function: Might a Tobin Tax Help?," Center for International and Development Economics Research (CIDER) Working Papers C95-058, University of California at Berkeley.
    2. Constanza Martínez Ventura, 2005. "Una revisión empírica sobre los determinantes del margen de intermediación en Colombia, 1989-2003," Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 23(48), pages 118-183, Junio.
    3. Pedro Albuquerque, 2006. "BAD taxation: Disintermediation and illiquidity in a bank account debits tax model," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 13(5), pages 601-624, September.
    4. Alonso, Miguel A. & Rallo, Juan Ramón & Romero, Alberto, 2013. "El efecto de los impuestos a las transacciones financieras en la estabilidad de los mercados de capital. Un debate sin resolver," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(317), pages 207-231, enero-mar.


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