Capital mobility and currency markets: Can they be tamed?

International Journal

Volumn 51, Issue 4, 1996, Pages 669-687

  Porter, Tony ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0041856392     PISSN: 00207020     EISSN: None     Source Type: Journal    
DOI: 10.2307/40203154     Document Type: Article

References (67)

1. Richard Lacayo, 'What goes up comes down,' Time, 9 January 1995, 32.
2. Inge Kaul, Isabelle Grunberg, and Mahbub ul Haq, 'Overview,' Mahbub ul Haq, Inge Kaul, and Isabelle Grunberg, eds, The Tobin Tax: Coping with Financial Volatility (New York and Oxford: Oxford University Press 1996) 3; Jeffrey Frankel, 'How well do foreign exchange markets work: might a Tobin tax help?' ibid, 41;
3. Inge Kaul, Isabelle Grunberg, and Mahbub ul Haq, 'Overview,' Mahbub ul Haq, Inge Kaul, and Isabelle Grunberg, eds, The Tobin Tax: Coping with Financial Volatility (New York and Oxford: Oxford University Press 1996) 3; Jeffrey Frankel, 'How well do foreign exchange markets work: might a Tobin tax help?' ibid, 41;
4. United Nations Conference on Trade and Development (UNCTAD) Secretariat, Recent Developments in International Investment and Transnational Corporations: Trends in Foreign Direct Investment (Geneva: UNCTAD Secretariat, 21 February 1995) 5.
5. Barry Eichengreen, James Tobin, and Charles Wyplosz, 'Two cases for sand in the wheels of international finance,' Economic Journal, 105 (January 1995), 162-72.
6. James Tobin, 'On the efficiency of the financial system,' Lloyds Bank Review 153 (July 1984), 1-15.
7. Kaul et al, 'Overview,' 3.
8. Yilmaz Akyuz, 'Taming international finance,' in Jonathan Miche and John Grieve Smith, eds, Managing the Global Economy (Oxford: Oxford University Press 1995), 68.
9. Charles P. Kindleberger, Manias, Panics and Crashes: A History of Financial Crises (New York: Basic Books 1989).
10. Akyuz, 'Taming international finance,' 68.
11. Frankel, 'How well do foreign exchange markets work?' 58;
12. and Charles Goodhart, 'The foreign exchange market: a random walk with a dragging anchor,' Economica 55 (November 1988) 437-60.
13. It should be noted, however, that a survey of Fortune 500 companies revealed that because of the cost not all foreign exchange risks were hedged and that foreign exchange rate risk was cited as a major concern. David Felix and Ranjit Sau, 'On the revue potential and phasing in of the Tobin tax,' in ul Haq et al, The Tobin Tax, 226.
14. Indeed the reduction of short-term trading may reduce liquidity and increase volatility. See W. Max Corden, Economic Policy, Exchange Rates and the International System (Chicago: University of Chicago Press 1994), 297.
15. See, for instance, the contradictory findings on the effect of volatility on trade reported by Frankel, 'How well do foreign exchange markets work?' 52.
16. Kenneth H. Bacon, 'Group calls on IMF to play bigger role on exchange rates,' Wall Street Journal, 7 July 1994, c19.
17. 'Call for moves on currencies,' New York Times, 20 March 1995. The 1985 and 1987 agreements were co-ordinated attempts on the part of the G-5 to influence exchange rates. See Yochi Funabashi, Managing the Dollar: From the Plaza to the Louvre (2nd ed; Washington DC: Institute for International Economics 1989).
18. 'Call for moves on currencies,' New York Times, 20 March 1995. The 1985 and 1987 agreements were co-ordinated attempts on the part of the G-5 to influence exchange rates. See Yochi Funabashi, Managing the Dollar: From the Plaza to the Louvre (2nd ed; Washington DC: Institute for International Economics 1989).
19. David Shirreff, 'Can anyone tame the currency market?' Euromoney, September 1993, 60.
20. These issues are discussed in Tony Porter, States, Markets and Regimes in Global Finance (Basingstoke: Macmillan 1993).
21. IMF, International Capital Markets, 8.
22. See, for instance, the section on 'Private sector solutions' in the special issue of Journal of Financial Services Research on 'Coping with financial fragility: a global perspective,' Nos 3/4 (September 1995).
23. Michael P. Dooley, 'The Tobin tax: good theory, weak evidence, questionable policy,' in ul Haq et al, The Tobin Tax, 88.
24. Porter, States, Markets and Regimes, chap 3.
25. Michael C. Webb, The Political Economy of Policy Coordination: International Adjustment Since 1945 (Ithaca and London: Cornell University Press 1994).
26. Akyuz, 'Taming international finance,' 87.
27. Ton Notermans, 'The abdication from national policy autonomy: why the macroeconomic policy regime has become so unfavorable to labor,' Politics and Society 21 (June 1993), 133-67.
28. John B. Goodman and Louis W. Pauly, 'The obsolescence of capital controls? Economic, management in an age of global markets,' World Politics 46 (October 1993), 50-82.
29. IMF, International Capital Markets, 108.
30. Michael P. Dooley, 'A survey of the academic literature on controls over international capital transactions,' National Bureau of Economic Research Working Paper 5352, Cambridge MA, 1995.
31. Dooley, 'The Tobin tax,' 94.
32. Tobin, 'Prologue,' xi.
33. This estimate is produced by Felix and Sau, 'On the revenue potential,' based on careful calculations that take into account the likely reduction in transactions that would result from the tax.
34. John Langmore, 'Restructuring economic and financial power: the potential role of a foreign exchange-transaction levy,' Futures 27 (March 1995), 189-94; David Felix, 'The Tobin tax proposal: background, issues and prospects,' ibid, 195-208; David Felix, 'Financial globalization and the Tobin tax,' Challenge, May-June 1995, 56-9; Barbara Crosette, 'As world leaders confer on poverty, Mitterrand urges new tax,' New York Times, 12 March 1995, 4; and various Financial Post articles on the summit available at the G7 Web Site, University of Toronto, at .
35. John Langmore, 'Restructuring economic and financial power: the potential role of a foreign exchange-transaction levy,' Futures 27 (March 1995), 189-94; David Felix, 'The Tobin tax proposal: background, issues and prospects,' ibid, 195-208; David Felix, 'Financial globalization and the Tobin tax,' Challenge, May-June 1995, 56-9; Barbara Crosette, 'As world leaders confer on poverty, Mitterrand urges new tax,' New York Times, 12 March 1995, 4; and various Financial Post articles on the summit available at the G7 Web Site, University of Toronto, at .
36. John Langmore, 'Restructuring economic and financial power: the potential role of a foreign exchange-transaction levy,' Futures 27 (March 1995), 189-94; David Felix, 'The Tobin tax proposal: background, issues and prospects,' ibid, 195-208; David Felix, 'Financial globalization and the Tobin tax,' Challenge, May-June 1995, 56-9; Barbara Crosette, 'As world leaders confer on poverty, Mitterrand urges new tax,' New York Times, 12 March 1995, 4; and various Financial Post articles on the summit available at the G7 Web Site, University of Toronto, at .
37. John Langmore, 'Restructuring economic and financial power: the potential role of a foreign exchange-transaction levy,' Futures 27 (March 1995), 189-94; David Felix, 'The Tobin tax proposal: background, issues and prospects,' ibid, 195-208; David Felix, 'Financial globalization and the Tobin tax,' Challenge, May-June 1995, 56-9; Barbara Crosette, 'As world leaders confer on poverty, Mitterrand urges new tax,' New York Times, 12 March 1995, 4; and various Financial Post articles on the summit available at the G7 Web Site, University of Toronto, at .
38. John Langmore, 'Restructuring economic and financial power: the potential role of a foreign exchange-transaction levy,' Futures 27 (March 1995), 189-94; David Felix, 'The Tobin tax proposal: background, issues and prospects,' ibid, 195-208; David Felix, 'Financial globalization and the Tobin tax,' Challenge, May-June 1995, 56-9; Barbara Crosette, 'As world leaders confer on poverty, Mitterrand urges new tax,' New York Times, 12 March 1995, 4; and various Financial Post articles on the summit available at the G7 Web Site, University of Toronto, at .
39. James Tobin, 'A proposal for international monetary reform,' Eastern Economic Journal 4 (July/October 1978), 155. Reprinted in Tobin, Essays in Economics: Theory and Policy (Cambridge and London: MIT Press 1982), 488-94.
40. James Tobin, 'A proposal for international monetary reform,' Eastern Economic Journal 4 (July/October 1978), 155. Reprinted in Tobin, Essays in Economics: Theory and Policy (Cambridge and London: MIT Press 1982), 488-94.
41. Langmore, 'Restructuring.'
42. Tobin, 'Prologue,' xi; and John M. Berry and Clay Chandler, 'Fast currency trades feed fears of a crisis,' Washington Post, 17 April 1995, A1, A13.
43. Tobin, 'Prologue,' xi; and John M. Berry and Clay Chandler, 'Fast currency trades feed fears of a crisis,' Washington Post, 17 April 1995, A1, A13.
44. Shirreff, 'Can anyone tame the currency market,' 60.
45. ul Haq et al, The Tobin tax.
46. Securities transactions taxes were seriously considered by the United States government in 1990 and 1993 under the Bush and Clinton administrations. See John Y. Campbell and Kenneth Froot, 'International experiences with securities transactions taxes' in Jeffrey Frankel, ed, The Internationalization of Equity Markets (Chicago: University of Chicago Press 1994).
47. Langmore, 'Restructuring,' 192.
48. Peter M. Garber, 'Issues of enforcement and evasion in a tax on foreign exchange transactions,' in ul Haq et al, The Tobin Tax.
49. Tobin, 'Prologue'; and Peter B. Kenen, 'The feasibility of taxing foreign exchange transactions,' in ibid.
50. Tobin, 'Prologue'; and Peter B. Kenen, 'The feasibility of taxing foreign exchange transactions,' in ibid.
51. Stephany Griffith-Jones, 'Institutional arrangements for a tax on international currency transactions,' in ibid, 143-58.
52. Ulrich Beck, Risk Society: Toward a New Modernity (London: Sage 1992).
53. Nigel Thrift, 'A phantom state? The detraditionalization of money, the international financial system, and international financial centres,' Political Geography 13 (July 1994), 299-327.
54. Charles Crowe, 'Forex shake-out creates a super-league,' Euromoney, January 1995, 103-4.
55. David Nusbaum, 'Trading the wide world of foreign exchange,' Futures, April 1995, 62-6.
56. This figure is based on 'Big boys in a big business,' Fortune, 7 March 1994, 49, in which the notional value of the top ten is US$15.3 trillion compared to a worldwide total of about US$16 trillion. The first total includes double counting, however (that is, counting both parties to a single transaction). My reduction for this is conservative as many (perhaps most) of these transactions would be with counterparts from outside the top ten.
57. Raj Bhala, 'Paying for the deal: an analysis of wire transfer law and international financial market interest groups,' Kansas Law Review 42 (spring 1994), n1.
58. The details are from Donald J.S. Brean, Richard M. Bird, and Melvyn Krauss, Taxation of International Portfolio Investment (Ottawa: Centre for Trade Policy and Law and the Institute for Research on Public Policy 1991), 35, 96.
59. Eric Helleiner, States and the Reemergence of Global Finance: From Bretton Woods to the 1990s (Ithaca NY and London: Cornell University Press 1994) 89.
60. Paul Bishop and Don Dixon, Foreign Exchange Handbook: Managing Risk and Opportunity in Global Currency Markets (New York: McGraw-Hill 1992), chap. 14.
61. Mark Penney and Robert Moncrieff, 'U.K. forex rules: what do the changes mean for U.S. multinationals?' International Taxation Journal 21 (autumn 1995), 46-59; and David Boneham, 'Forex and FI: the new regime for the taxation of foreign exchange gains and losses and financial instruments has begun,' Accountancy, April 1995, 157.
62. Mark Penney and Robert Moncrieff, 'U.K. forex rules: what do the changes mean for U.S. multinationals?' International Taxation Journal 21 (autumn 1995), 46-59; and David Boneham, 'Forex and FI: the new regime for the taxation of foreign exchange gains and losses and financial instruments has begun,' Accountancy, April 1995, 157.
63. Ken Kral, Jack Serota, Carmen Johnson, and Price Waterhouse LLP International Tax Services, 'Complying with global transfer pricing rules,' Journal of Accountancy, September 1995, 28. The new transfer pricing regulations cover financial firms. Significantly, the second and third United States Advance Pricing Agreements, a key tool in the regime, were established in 1992 by United States and United Kingdom tax authorities for Sumitomo and Barclay's banks. They cover income allocations for interest rate and cross-currency swaps and are 'a very important development in the taxation of international financial markets.' Jill C. Pagan and J. Scott Wilkie, Transfer Pricing Strategy in a Global Economy (Amsterdam: International Bureau of Fiscal Documentation Publications 1993), 194.
64. Ken Kral, Jack Serota, Carmen Johnson, and Price Waterhouse LLP International Tax Services, 'Complying with global transfer pricing rules,' Journal of Accountancy, September 1995, 28. The new transfer pricing regulations cover financial firms. Significantly, the second and third United States Advance Pricing Agreements, a key tool in the regime, were established in 1992 by United States and United Kingdom tax authorities for Sumitomo and Barclay's banks. They cover income allocations for interest rate and cross-currency swaps and are 'a very important development in the taxation of international financial markets.' Jill C. Pagan and J. Scott Wilkie, Transfer Pricing Strategy in a Global Economy (Amsterdam: International Bureau of Fiscal Documentation Publications 1993), 194.
65. For information on the Basle Committee see Porter, States, Markets and Regimes, esp chap 3.
66. For information on these issues see Basle Committee on Banking Supervision, Report on International Developments in Banking Supervision, No 9, 1995.
67. Charles Freeland, 'The work of the Basle Committee,' in Robert C. Effros, ed, Current Legal Issues Affecting Central Banks (Washington DC: IMF 1994), 237-8.