Do China's capital controls still bind? Implications for monetary autonomy and capital liberalisation
AbstractThe paper argues that China's capital controls remain substantially binding. This has allowed the Chinese authorities to retain some degree of short-term monetary autonomy, despite the fixed exchange rate up to July 2005. Although the Chinese capital controls have not been watertight, we find sustained and significant gaps between onshore and offshore renminbi interest rates and persistent dollar/renminbi interest rate differentials during the period of a de facto dollar peg. While some cross-border flows do respond to market expectations and relative yields, they have not been large enough to equalise onshore and offshore renminbi yields.
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Bibliographic InfoPaper provided by Bank for International Settlements in its series BIS Working Papers with number 233.
Length: 34 pages
Date of creation: Aug 2007
Date of revision:
Foreign exchange market; capital flows; capital controls; monetary policy; financial stability and the Chinese economy;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-02 (All new papers)
- NEP-CBA-2007-09-02 (Central Banking)
- NEP-CNA-2007-09-02 (China)
- NEP-IFN-2007-09-02 (International Finance)
- NEP-MAC-2007-09-02 (Macroeconomics)
- NEP-MON-2007-09-02 (Monetary Economics)
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