Taxing Excessive Currency Speculation
To Prevent Social Crisis and Finance Global Challenges
A CIDSE-Caritas Internationalis-Justice and Peace Europe
Background Paper - January 1999
Glossary and Reference List
GLOSSARY
Band-wagon effects
Buying and selling of assets not related to any personal analysis of the value of the asset , but just mimicking the action of a few reputed large investors. Synonym: herding.
Bank of International Settlements (BIS):
International organisation, created at The Hague Conference in 1930, owned and controlled by the central banks, in order to render a number of services to them, and as such, indirectly, also to the international financial system. The organisation has its headquarters in Basle.
Fundamental trading:
Buying and selling of financial assets based on the underlying determinants of the value of the asset. Opposite of 'noise' trading.
Hedging:
Covering a risky position that results from buying or selling a financial asset whose value may change over time.
Official Development Assistance (ODA):
Financial assistance in the form of grants or low-interest loans for developing countries and multilateral institutions provided by official public agencies, including state and local governments. Excludes assistance for military purposes. Coordination is done by the Development Assistance Committee (DAC) of the OECD in Paris.
Noise trading:
Buying and selling of financial assets not based on the underlying determinants of the value of the asset, but instead on price dynamics, guided by analysis techniques such as technical analysis or 'rumours'. Opposite of 'fundamentals' trading.
Speculation:
In a financial market sense, it refers to deliberately exposing oneself to a risky situation e.g. buying or selling a financial asset whose value can change in order to take advantage of an anticipated favourable future price change of the asset. If, on the other hand, the value changes disfavourably, you are not protected against this and incur a loss.
United Nations Development Program (UNDP):
Created in 1966, it is responsible for administering and co-ordinating development projects and technical assistance provided under the auspices of or in liaison with the UN system of development agencies and organisations.
Zero-sum game:
Situation in which the (financial) advantage for all parties combined is zero. As such, when one party makes a profit out of it, another party makes a loss for the same amount.
REFERENCE LIST
CAFOD [1998], Taming the Tigers - The IMF and the Asian Crisis, CAFOD & FOCUS on global South, March 1988.
Davidson, Paul [1997], "Are Grains of Sand in the Wheels of International Finance Sufficient to Do the Job When Boulders are often Required", The Economic Journal, Vol.107, No.5, pp.671-686.
Frankel, Jeffrey A. [1996], How Well do Foreign Exchange Markets Function: Might a Tobin Tax Help?, NBER Working Paper No.5422, January 1996.
Griffith-Jones, Stephanie [1996], "Institutional arrangements for a tax on international currency transactions", in: ul Haq, Mahbub, Inge Kaul & Isabelle Grunberg (eds.), The Tobin Tax: Coping with Financial Volatility, New York, Oxford University Press.
ul Haq, Mahbub, Inge Kaul & Isabelle Grunberg (eds.) [1996], The Tobin Tax: Coping with Financial Volatility, New York, Oxford University Press.
ILO [1998a], The Social Impact of the Asian Financial Crisis. Technical Report for the High-Level Tripartite Meeting on Social Responses to the Financial Crisis in East and South-East Asia (Bangkok, 22-24 April 1998).
ILO [1998b], World Employment Outlook 1998-99, September 1998.
Krugman, Paul [1998], Currency Crises, http://web.mit.edu/krugman/www/crises.html.
Michalos, Alex [1997], Good Taxes. The Case for Taxing Foreign Currency Exchange and other Financial Transactions, Toronto & Oxford, Dudurn Press, 87p.
Raffer, Kunibert [1998], "The Tobin Tax: Reviving a Discussion", World Development, Vol.26, No.3, pp.529-538.
Spahn, Paul Bernd [1996], "The Tobin Tax and Exchange Rate Stability", Finance and Development, Vol.33, June 1996, pp.24-27.
Tobin, James [1978], "A Proposal for International Monetary Reform", Eastern Economic Journal, Vol.4, pp.153-159.
Van Liedekerke, Luc [1998], Currency Crises, Tobin Tax and Redistributive Justice, UFSIA mimeo.