Needless to say, where financial market fluctuations reflect changes in domestic macroeconomic policies that put investors at greater risk than before, the tax would be aimed at treating the symptoms rather than the cause of the problem. In all, I find the case for a tax on currency transactions completely unconvincing.
Promoting greater financial market stability If a tax is not a good idea, how else can we promote greater stability in international financial markets and reduce potential disruptions to domestic policymaking? I have already talked about the value of a flexible exchange rate system in facilitating adjustment to “real” shocks and allowing national authorities to pursue an independent monetary policy.