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Convertibility, currency controls and the cost of capital in Western Europe, 1950-1999

Listed author(s):
  • Hans-Joachim Voth

    (Economics Department, UPF, Barcelona, Spain)

For most of the post-war period, Europe's capital markets remained largely closed to international capital flows. This paper explores the costs of this policy. Using an event-study methodology, I examine the extent to which restrictions of current and capital account convertibility affected stock returns. The delayed introduction of full currency convertibility increased the cost of capital. Also, a string of measures designed to reduce capital mobility before the ultimate collapse of the Bretton Woods System had considerable negative effects. These findings offer an explanation for the mounting evidence suggesting that capital account liberalization facilitates growth. Copyright © 2003 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/ijfe.210
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Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 8 (2003)
Issue (Month): 3 ()
Pages: 255-276

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Handle: RePEc:ijf:ijfiec:v:8:y:2003:i:3:p:255-276
DOI: 10.1002/ijfe.210
Contact details of provider: Web page: http://www.interscience.wiley.com/jpages/1076-9307/

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