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Regional capital mobility in China: Economic reform with limited financial integration

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  • Lai, Jennifer T.
  • McNelis, Paul D.
  • Yan, Isabel K.M.

Abstract

This paper assesses the changes in the regional capital mobility in China during the period of economic reform in 1978–2008 by employing a panel time varying coefficient (TVP) model. This approach is much more suitable to model China's evolution in the regional capital mobility than a standard structural break model as China's reforms took place gradually and were often implemented over several stages. Using the TVP model, we find that (1) China's provincial capital mobility demonstrated a moderate improvement over the sample period, but worsened temporarily between 1994 and 1997. This is probably due to the government's effort to combat inflation which reduced the investment and transfers to regions; (2) regions with the most developed and least developed provinces experienced higher degree of capital mobility improvement than those in the middle.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 37 (2013)
Issue (Month): C ()
Pages: 493-503

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Handle: RePEc:eee:jimfin:v:37:y:2013:i:c:p:493-503

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Web page: http://www.elsevier.com/locate/inca/30443

Related research

Keywords: Regional capital mobility; China capital market integration; Permanent income model; Panel time-varying coefficient model;

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References

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Cited by:
  1. He , Qing & Xue, Chang & Zhu, Chenqi, 2014. "Financial development and patterns of industrial specialization: Regional evidence from China," BOFIT Discussion Papers 12/2014, Bank of Finland, Institute for Economies in Transition.

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