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

Hans-Joachim Voth

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: 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.

Keywords: Cost of capital; liberalization; current account; capital account; convertibility (search for similar items in EconPapers)
JEL-codes: F21 G15 (search for similar items in EconPapers)
Date: 2001-05
New Economics Papers: this item is included in nep-ifn
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Citations: View citations in EconPapers (3)

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Journal Article: Convertibility, currency controls and the cost of capital in Western Europe, 1950-1999 (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:552

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