A Study On The Effectiveness Of Tobin Tax On Cross-border Capital Flow Management

The frequent outbreak of financial crisis and increasing hot money flow rate are general problems,which make the academia rethink the relationship between capital account liberalization and capital controls in the perspective of financial security.As a price-based capital control tool,Tobin Tax and its effectiveness to the cross-border management are of great significance.This paper introduces the practice of Tobin Tax in Brazil and Chile and sums up the background.It proves that a single Tobin Tax has a limited effect to the cross-border capital flow management.Meanwhile,Tobin Tax plays a good role combined with other macroeconomic policies.Through the empirical analysis,it is found that the effectiveness of China capital controls is declining.Therefore,a country's successful capital flow cannot work without policy coordination,institutional background,sound financial markets and macro prudential assessment.China should draw lessons from Brazil and Chile.Based on China's national condition,the next stage may consider adopting the Tobin Tax: taxation on the outflow side with the corresponding macro polices;introduce the two-rate structure;speed up market-oriented exchange rate reform;establish credible exchange rate target zone;introduction of non-linear Tobin Tax to improve cross-border capital flow management conditions.