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Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title A provincial view of global imbalances: regional capital flows in China
Organization Unit
  • Samuel Cudré
  • Mathias Hoffmann
  • English
Institution University of Zurich
Series Name Working paper series / Department of Economics
Number 162
ISSN 1664-7041
Number of Pages 46
Date 2014
Abstract Text We model capital flows among Chinese provinces using a theory-based variance decomposition that allows us to gauge the importance of various channels of external adjustments at the regional level: variation in intertemporal prices - domestic and international interest rates and the real exchange rate - and intertemporal variation in quantities (cash flows of output, investment and government spending). We find that our simple framework can account for around 85 percent of the variation in regional capital flows over the 1985-2010 period. Our results suggest that the relative importance of private and state-owned enterprises, a province's level of integration into the world economy and its sectoral composition play an important role for external adjustment vis-à-vis the rest of China and the world. Specifically, we find strong empirical support for the view that differential access of private and state-owned enterprises to finance is a key driver of China's surpluses. We discuss implications of our results for global imbalances in capital flows.
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Keywords China, Chinese provinces, capital flows, current account, global imbalances, external adjustment, present-value models, regional business cycles, Chinaforschung, Aussenhandel, Globalisierung, Import, Export, Faktorproduktivit├Ąt, Investition, Investitionsquote, Sparquote, Kapitalallokation