Do Inflows or Outflows Dominate? Global Implications of Capital Account Liberalization in China

Author/Editor:

Tamim Bayoumi ; Franziska L Ohnsorge

Publication Date:

August 28, 2013

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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.

Series:

Working Paper No. 2013/189

Subject:

English

Publication Date:

August 28, 2013

ISBN/ISSN:

9781475532159/1018-5941

Stock No:

WPIEA2013189

Pages:

32

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