Abolishing Exchange Control: The UK Experience
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.
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