Financial Crisis and Tobin Taxation : An Event Analysis

Under the context of EMU debt and financial crisis we assess the impact of EMU's legislative initiative on Tobin tax for financial regulation. Specifically we focus on its impact on bond and equity volatility for a representative basket of 7 countries: Germany, France (core EMU) and Greece, Italy, Ireland, Portugal and Spain (periphery EMU). In the absence of historical data on volume and volatility of transactions of a (simultaneous) security transaction tax (STT), we derive a pure event analysis. Secondly we expect the announcement of the tax decision to impact volatility in bond/equity market. We find evidence for the core and periphery EMU bond return portfolio (under both approaches) and core equity EMU under the event study methodology