Effectiveness of Capital Controls and Sterilizations in China
AbstractSince 2003, China has been facing a trilemma of determining how to maintain independent monetary policy and limit exchange rate flexibility simultaneously, while facing persistent and substantial international capital flows. The present paper is an empirical evaluation of the effectiveness of China's sterilizations and capital mobility regulations, measured by sterilization and offset coefficients, respectively, using monthly data between mid-1999 and March 2009. We find that the effectiveness of China's sterilizations is almost perfect in terms of the monetary base, but not in terms of M2, and that China's capital controls still work but are not quite effective. Recursive estimation reveals that increasing mobility of capital flows and decreasing effectiveness of sterilizations might undercut China's ability to maintain monetary autonomy and domestic currency stability simultaneously. To solve the trilemma smoothly, China's monetary authority should continue to relax the management of the exchange rate, and take further steps towards deregulation of capital outflows. Copyright (c) 2010 The Author Journal compilation (c) 2010 Institute of World Economics and Politics, Chinese Academy of Social Sciences.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Institute of World Economics and Politics, Chinese Academy of Social Sciences in its journal China & World Economy.
Volume (Year): 18 (2010)
Issue (Month): 3 ()
Contact details of provider:
Postal: No. 5 Jian Guo Men Nei Street, Beijing 100732
Phone: (0086-10) 65126105
Fax: (0086-10) 65126105
Web page: http://www.blackwellpublishing.com/journal.asp?ref=1671-2234
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Liu, Yan & Chang, Hsu-Ling & Su, Chi-Wei, 2013. "Do real interest rates converge across East Asian countries based on China?," Economic Modelling, Elsevier, vol. 31(C), pages 467-473.
- Liu, Lin & Chang, Hsu-Ling & Su, Chi-Wei & Jiang, Chun, 2013. "Real interest rate parity in East Asian countries based on China with flexible Fourier stationary test," Japan and the World Economy, Elsevier, vol. 25, pages 52-58.
- Dai, Meixing, 2011.
"Motivations and strategies for a real revaluation of the Yuan,"
30440, University Library of Munich, Germany.
- Meixing Dai, 2011. "Motivations and strategies for a real revaluation of the Yuan," Working Papers of BETA 2011-23, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.