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Monetary policy and Tobin taxes: a welfare analysis
Economics Working Papers (2002–2016)
  • Jong Kook Shin, Queen's University Belfast
  • Rajesh Singh, Iowa State University
  • Chetan Subramanian, Indian Institute of Management Bangalore
Document Type
Working Paper
Publication Date
Working Paper Number
WP #14006, March 2014
This paper studies the choice of monetary policy regime in a small open economy under productivity shocks and noise traders in forex markets. We focus on two simple rules: fixed exchange rates and inflation targeting. We contrast the above two rules against optimal policy with commitment. In general, the presence of noise traders increases the desirability of a fixed exchange rate regime. We also evaluate the welfare impact of Tobin taxes on capital flows. These taxes help unambiguously in the absence of productivity shocks; their welfare impact under productivity shocks depends on the monetary regime in place and the trade elasticity between domestic and foreign goods.
File Format
15 pages
Citation Information
Jong Kook Shin, Rajesh Singh and Chetan Subramanian. "Monetary policy and Tobin taxes: a welfare analysis" (2014)
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