Assessing International Capital Mobility: Evidence from China

Jagdish Handa, Jie Lin and Helei Wang

Chapter 5 in Studies in East Asian Economies:Capital Flows, Exchange Rates and Monetary Policy, 2011, pp 183-216 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractThis chapter assesses China's international capital mobility during 1952'2005 and two sub-periods 1952–1978 and 1979–2005. The analysis uses two alternative approaches: the saving-investment correlation one and the intertemporal present value approach to the current account with consumption smoothing. Our econometric findings from the Johansen and Pesaran's (bounds testing) cointegration techniques for both approaches support each other. Our overall finding is that China had extremely limited capital mobility during the pre-reform period 1952–1978 and limited capital mobility during the post-reform period 1979–2005. Although its international capital mobility increased substantially after the start of economic liberalization in 1979, it remained less than that implied by the consumption-smoothing approach to the current account.

Keywords: International Capital Mobility; Monetary Policy; Exchange Rates; Economic Growth; Taylor Rule; East Asian Economies; China (search for similar items in EconPapers)
Date: 2011
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