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A provincial view of global imbalances: regional capital flows in China


Cudré, Samuel; Hoffmann, Mathias (2017). A provincial view of global imbalances: regional capital flows in China. Review of World Economics, 153(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.

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.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:China, Chinese provinces, Capital flows, current account, global imbalances, external adjustment, present-value models, regional business cycles
Language:English
Date:August 2017
Deposited On:18 Jan 2018 08:22
Last Modified:20 Sep 2018 04:27
Publisher:Springer
ISSN:1610-2878
Additional Information:Also published as Department of Economics, Working Paper No. 162 (see https://doi.org/10.5167/uzh-97029).
OA Status:Green
Publisher DOI:https://doi.org/10.1007/s10290-017-0278-0

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