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IDS In Focus Policy Briefing 14 - Tackling Instability in Financial Markets with a Panic Tax
Although the motivation for much recent debate on introducing a financial transaction or 'Tobin' tax is to generate revenue for public goods - for example through the Robin Hood Tax campaign - James Tobin first proposed his idea for a different reason: to enhance market stability. However, evidence suggests that a Tobin Tax might not actually reduce volatility in markets. A better solution might be a Panic Tax - a simple mechanism to tax panics and manias rather than every day trade - that promotes stability by dampening crashes and booms, providing policy space for more orderly adjustments in the financial markets.
Publications
- McCulloch, N. and Pacillo, G. (2010) 'Is a Financial Transaction Tax a Good Idea? A Review of the Evidence', IDS InFocus Policy Briefing 14.2, Brighton: IDS
- McCulloch, N. (2010) 'Tackling Instability in Financial Markets with a Panic Tax', IDS In Focus Policy Briefing Special issue, Brighton: IDS