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Abolishing Exchange Control: The UK Experience


  • Artis, Michael J
  • Taylor, Mark P


The paper addresses some of the effects of the removal of exchange controls in the UK in 1979. Nonparametric tests indicate that one consequence of the removal was a marked reduction in the volatility of the on-shore/off-shore differential. Co-integration tests suggest that abolition contributed positively to the long run integration of the UK stock market with similar markets in other international centers, though there is no evidence that the correlation of short run stock market returns across international centers was more strongly positive after 1979. The evidence of strong integration effect at the `short' end of the capital market is consistent with qualitative monetary regulations which have a `tax-like' effect.

Suggested Citation

  • Artis, Michael J & Taylor, Mark P, 1989. "Abolishing Exchange Control: The UK Experience," CEPR Discussion Papers 294, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:294

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    References listed on IDEAS

    1. Robert C. Merton, 2005. "Theory of rational option pricing," World Scientific Book Chapters,in: Theory Of Valuation, chapter 8, pages 229-288 World Scientific Publishing Co. Pte. Ltd..
    2. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-638, June.
    3. Lawrence H. Summers, 1981. "Taxation and Corporate Investment: A q-Theory Approach," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1), pages 67-140.
    4. Blanchard, Olivier J, 1981. "Output, the Stock Market, and Interest Rates," American Economic Review, American Economic Association, vol. 71(1), pages 132-143, March.
    5. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-1176, December.
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    Cited by:

    1. Daniele Checchi, 1992. "Capital controls and distribution of income: Empirical evidence for Great Britain Japan and Australia," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 128(3), pages 558-587, September.
    2. Richard C. Marston, 1992. "Interest Differentials Under Fixed and Flexible Exchange Rates: The Effects of Capital Controls and Exchange Risk," NBER Working Papers 4053, National Bureau of Economic Research, Inc.
    3. David Begg & Stephany Griffith-Jones, 1998. "Swinging since the 60's: Fluctuations in UK Saving and Lessons for Latin America," Research Department Publications 3032, Inter-American Development Bank, Research Department.
    4. Lucio Sarno & Mark Taylor, 1998. "Exchange controls, international capital flows and saving-investment correlations in the UK: An empirical investigation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 134(1), pages 69-98, March.
    5. Schmukler, Sergio L. & Serven, Luis, 2002. "Pricing currency risk : facts and puzzles from currency boards," Policy Research Working Paper Series 2815, The World Bank.
    6. R. B. Johnston & Chris Ryan, 1994. "The Impact of Controlson Capital Movementson the Private Capital Accounts of Countries' Balance of Payments; Empirical Estimates and Policy Implications," IMF Working Papers 94/78, International Monetary Fund.


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