A provincial view of global imbalances: regional capital flows in China
Samuel Cudré () and
Mathias Hoffmann ()
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Samuel Cudré: McKinsey & Co
Review of World Economics (Weltwirtschaftliches Archiv), 2017, vol. 153, issue 3, 573-599
Abstract We model capital flows among Chinese provinces. A version of the present value model of the current account (PVMCA) with non-tradable goods and a savings wedge accounts for around 80% of the variation in inter-provincial capital flows over the 1986–2010 period. The PVMCA also allows us to identify the channels of external adjustment in capital flows at the province-level: variation in intertemporal prices (domestic and international interest rates, the provincial real exchange rate) and intertemporal variation in quantities (output, investment and government spending). We find that cross-province variation in the importance of these channels is correlated with the importance of private and state-owned enterprises and demographic factors. We discuss implications of our results for global imbalances in capital flows.
Keywords: China; Chinese provinces; Capital flows; Current account; Global imbalances; External adjustment; Present-value models; Regional business cycles (search for similar items in EconPapers)
JEL-codes: F30 F32 F40 (search for similar items in EconPapers)
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