We argue that a transaction tax is likely to amplify, not dampen, volatility in the foreign exchange markets. Our argument stems from the decentralised trading practice and the presumable discrepancy between 'informed' and 'uninformed' traders' valuations. Since informed traders' valuations are...

The transactions tax on futures sharply reduced trading volume on wheat and corn contracts during the 1920s and 1930s but had no apparent effect on volatility or market quality. I find no evidence of a tax effect on open interest: I hypothesize this is because the relative magnitude of the tax...

This chapter presents the results of the comprehensive literature survey and supportive empirical assessment of the potential impacts of the Financial Transactions Tax recently adopted by the European Commission in response to the significant financial sector misallocations arising from the...

The issue of whether a tax should be levied on transactions of financial assets (FTT) has been controversial ever since it was proposed by Keynes (1936). The debate turns on the answers to three questions. First, is there excessive trading in financial markets which causes exchange rates, stock...

The European debate around the taxation on financial transactions does not fit in a genuine theoretical framework, therefore exposing the proposed measures to diverse criticisms. What are the foundations of this particular tax? The law proposal of the European Parliament, published in May 2012,...