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Article
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
3-8-2014
Working Paper Number
WP #14006, March 2014
Abstract
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.
Disciplines
File Format
application/pdf
Length
15 pages
Citation Information
Jong Kook Shin, Rajesh Singh and Chetan Subramanian. "Monetary policy and Tobin taxes: a welfare analysis" (2014)
Available at: http://works.bepress.com/rajesh-singh/10/