The Tobin Tax: A Mean - Variance Approach

Authors: Bruno Bosco; Alessandro Santoro

Source: FinanzArchiv: Public Finance Analysis, Volume 60, Number 3, September 2004 , pp. 446-459(14)

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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.

Keywords: TOBIN TAX; PORTFOLIO ANALYSIS; CURRENCY SPECULATION

Document Type: Research article

DOI: http://dx.doi.org/10.1628/0015221042396140

Publication date: 2004-09-01

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FinanzArchiv founded in 1884 is one of the world's oldest professional journals in public finance.

FinanzArchiv publishes original work from all fields of public economics which are of interest to an international readership, e.g. taxation, public debt, public goods, public choice, federalism, market failure, social policy, and the welfare state. Special emphasis is on high-quality theoretical and empirical papers on current policy issues.

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FinanzArchiv is a fully peer-reviewed journal committed to a prompt turnaround of submissions. No more than four months should pass between online submission of a manuscript and the editor's decision on acceptance, revision, or rejection.
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The Tobin Tax: A Mean - Variance Approach

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