China as a Reserve Sink: The Evidence from Offset and Sterilization Coefficients

Alice Ouyang (), Ramkishen Rajan and Thomas D. Willett
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Thomas D. Willett: Claremont Graduate University

No 102007, Working Papers from Hong Kong Institute for Monetary Research

Abstract: China has been stockpiling international reserves at an extremely rapid pace since the late 1990s and has surpassed Japan to become the largest reserve holder in the world. This paper undertakes an empirical investigation to assess the extent of de facto sterilization and capital mobility using monthly data between mid 1999 and late 2005. We find that China has been able to successfully sterilize most of these reserve increases, thus making it a reserve sink such as Germany was under the Bretton Woods system. Recursive estimation of offset coefficients, however, finds evidence of increasing mobile capital flows that may undercut China's ability to continue high levels of sterilization.

Keywords: Balance of payments; China; Capital Mobility; Reserves; Sterilization (search for similar items in EconPapers)
JEL-codes: E51 E52 E58 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2007-05
New Economics Papers: this item is included in nep-cna, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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Related works:
Journal Article: China as a reserve sink: The evidence from offset and sterilization coefficients (2010)
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