Do Inflows or Outflows Dominate? Global Implications of Capital Account Liberalization in China
August 28, 2013
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Summary
This paper assesses the implications of Chinese capital account liberalization for capital flows. Stylized facts from capital account liberalization in advanced and large emerging market economies illustrate that capital account liberalization has historically generated large gross capital in- and outflows, but the direction of net flows has depended on many factors. An econometric portfolio allocation model finds that capital controls significantly dampen cross-border portfolio asset holdings. The model also suggests that capital account liberalization in China may trigger net portfolio outflows as large domestic savings seek to diversify abroad.
Subject: Balance of payments, Bonds, Capital account, Capital account liberalization, Financial institutions, Financial markets, Stock markets, Stocks
Keywords: average equity, bond yield, Bonds, capital account, Capital account, Capital account liberalization, capital flows, FDI liberalization, financial development, foreign currency, Global, inflow restriction, investment outflow, market portfolio, outflow restriction, portfolio assets, portfolio flows, portfolio investment flow, portfolio investment inflow, portfolio investment outflow, sovereign bond, Stock markets, Stocks, WP
Pages:
32
Volume:
2013
DOI:
Issue:
189
Series:
Working Paper No. 2013/189
Stock No:
WPIEA2013189
ISBN:
9781475532159
ISSN:
1018-5941
