Regional capital mobility in China: Economic reform with limited financial integration

Jennifer Lai, Paul McNelis () and Isabel K.M. Yan

Journal of International Money and Finance, 2013, vol. 37, issue C, 493-503

Abstract: This paper assesses the changes in the regional capital mobility in China during the period of economic reform in 1978–2008 by employing a panel time varying coefficient (TVP) model. This approach is much more suitable to model China's evolution in the regional capital mobility than a standard structural break model as China's reforms took place gradually and were often implemented over several stages. Using the TVP model, we find that (1) China's provincial capital mobility demonstrated a moderate improvement over the sample period, but worsened temporarily between 1994 and 1997. This is probably due to the government's effort to combat inflation which reduced the investment and transfers to regions; (2) regions with the most developed and least developed provinces experienced higher degree of capital mobility improvement than those in the middle.

Keywords: Regional capital mobility; China capital market integration; Permanent income model; Panel time-varying coefficient model (search for similar items in EconPapers)
JEL-codes: C11 C23 F15 O18 O53 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:37:y:2013:i:c:p:493-503

DOI: 10.1016/j.jimonfin.2013.07.001

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