Distortions of International Financial System. A Financial Transactions Tax on Foreign Exchange as Alternatives

This paper focuses on the introduction of a Currency Financial Transaction Tax [CFTT). After analizing the main distorsions affecting the International Financial System (1FS) we present the main characteristics of this tax, which can be considered the most ambition attempt to regulate the IFS. Starting, as a departing point, the boom-bust cycle and its role in the development of financial and currency crisis, the idea of a CFTT as a preventive instrument rather than a post-crisis solution is backed here. We also consider that if we use the revenues of CFTT to finance an International Lender of Last Resort, the convenience of this CFTT when increases of transaction costs, will be independent of the capital flows elasticiy. Finally, we argue that the main limits to the practical implementation of the CFTT seem to stem from the International political sphere.

José Manuel Agüera Sirgo
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