Exchange rate instability and the Tobin tax

Professor Tobin's proposal for a tax on foreign exchange transactions is attracting renewed attention in view of its growing revenue potential and concern at the instability of currency markets. This article considers a volume of essays on the possible effects and feasibility of the tax, and a report for the IMF proposing a two-tier variant of the tax. It goes on to discuss the principles on which a new and more stable exchange rate regime should be based.