Deceleration of Foreign Exchange Market: Tobin Tax and Implementation

Abstract

Since the collapse of Bretton Woods regime in 1970s, the growth of foreign exchange transactions have become overrun. Numerous amount of money has been invested on foreign currency speculative trade. However, such high level of speculation has caused market volatility and turned into one of the igniter of global economic crises. A Nobel Prize economist, James Tobin, then generated the conceptual regime to tax each speculative foreign transaction. This paper will not only provide the background of foreign transactions and the speculation but also illustrate pros and cons of “Tobin Tax” system including the analysis of its plausible implementation.o