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Simon James

A worldwide uniform tax on spot transactions across currencies proposed in 1972 by James Tobin, a Nobel prizewinner in Economics. It has been argued that such a tax might reduce volatility on foreign exchange markets. Tobin (1996) suggested that it would ‘throw some sand’ in the wheels of financial markets that were ‘super-efficient’ and thus allow greater scope for national monetary policies to deal with national macroeconomic needs. The case for such a tax has been disputed. Further reading

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Edited by Louis-Philippe Rochon and Sergio Rossi

Since the 1980s, successive financial crises have generated increasing instability, which has triggered two effects: on the one hand, they have destroyed the belief in financial markets’ efficiency; while, on the other hand, they have reinforced the conviction of the necessity for appropriate regulations. One of the proposed financial regulations attracted widespread attention, namely the Tobin tax. James Tobin invented it already in the early 1970s (see Tobin, 1974 ) but set out its final and detailed formulation only in a 1978 article (see Tobin, 1978

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Philip Arestis

In his 1972 Janeway lecture at Princeton, James Tobin ( 1974 ) proposed a tax on foreign exchange transactions as a way of limiting speculation, enhancing the efficacy of macroeconomic policy, and raising tax revenues; Davidson ( 1997 ) opposes this view. Keynes, in the Treatise on Money and in the General Theory , had already suggested that a tax on foreign lending to contain speculative capital movements might be necessary (see also Haq et al. 1996 ). Official interest in the Tobin tax has been expressed repeatedly. The United Nations Development

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Philip Arestis

346 Tobin tax Reprinted as The Collected Writings of John Maynard Keynes, Vol. 14, London: Macmillan for the Royal Economic Society. Minsky, Hyman (1982), Can ‘It’ Happen Again?, Armonk, NY: M.E. Sharpe. Robinson, Joan (1980), ‘History vs. equilibrium’, in J. Robinson, Collected Economic Papers, Vol. 5, Cambridge, MA: MIT Press, pp. 45–58. Tobin Tax In his 1972 Janeway lecture at Princeton, James Tobin (1974) proposed a tax on foreign exchange transactions as a way of limiting speculation, enhancing the efficacy of macroeconomic policy, and raising tax revenues

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Paul Davidson

12. Exchange rates and the Tobin tax Eichengreen, Tobin and Wyplosz have argued that volatility in foreign exchange markets due to speculation can have ‘real economic consequences devastating for particular sectors and whole economies’.1 To constrain speculative behavior in exchange rate markets, Eichengreen et al. propose a very small tax on all foreign exchange transactions. At the same time that this proposal appeared in print in the winter of 1994–95, the Mexican peso crisis spilled over into the dollar problem. In international financial markets where image

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James Tobin

6. Remarks at a round table on Tobin Tax I begin by reviewing the developments in international financial markets and lnstitutions that led me to propose a tax on currency exchange transactions in 1972 and to elaborate the proposal in my 1978 presidential address to the Eastern Economics Association, titled ‘A Proposal for International Monetary Reform’. This has come to be known as the Tobin Tax. It’s no fun having your name attached to a tax these days. At the time the debate on reform focused on alternative exchange rate regimes, fixed versus floating with

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Philip Arestis and Malcolm Sawyer

13. An evaluation of the Tobin transactions tax Philip Arestis and Malcolm Sawyer I INTRODUCTION There has been considerable interest in the idea of a tax levied on foreign exchange dealings, first suggested by James Tobin in his 1972 Janeway lecture at Princeton (Tobin, 1974; see also 1978). Some official interest in a transactions tax has been expressed by United Nations Development Programme (1994) and UNCTAD (1995) who have seen its possibilities for raising large amounts of money which could be used to finance development. The purpose of this chapter is to

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James Tobin

5. Prologue to The Tobin Tax: Coping with Financial Volatility* The publication of this book and the holding of the conference that preceded it testify to an active interest in my proposal for an international tax on foreign exchange transactions – the so-called Tobin tax. Bob Haq, once a student of mine, Inge Kaul, Isabelle Grunberg and their colleagues deserve great credit for their initiative in organizing this project – they assembled leading experts in international economics, development, global finance and world politics. They have certainly earned my

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Kwan S. Kim and Seok-Hyeon Kim

2. The Tobin tax revisited in the context of global governance on capital markets Kwan S. Kim and Seok-Hyeon Kim* 1 INTRODUCTION Capital flight and high volatility in exchange rate markets have been recurrent problems for the global financial system, particularly in the wake of the adoption of floating rate regimes in 1971. Coupled with the enormous size of global exchange markets, the increasing volatility of the exchange rates began to reveal the unstable nature of the flexible exchange rate system. By the mid-1990s, the global volume of daily foreign exchange

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Paul Davidson

12. Policies for fighting speculation in foreign exchange markets: the Tobin tax versus Keynes’s views Paul Davidson I INTRODUCTION In the classical model, where agents know the future with perfect certainty or, at least, can form statistically reliable predictions without persistent errors (that is, rational expectations), speculative market activities can be justified as stabilizing. When, on the other hand, the economic future is uncertain (non-ergodic), today’s agents ‘know’ they cannot reliably predict future outcomes. Hicks (1979: vii) has argued that, if