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Is China or India more financially open?

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  • Guonan Ma
  • Robert N McCauley

Abstract

Measures of de facto capital account openness for China and India raise the question whether the Chinn-Ito measure of de jure capital account openness is useful and whether the Lane-Milesi-Ferretti measure of de facto openness ranks the two countries correctly. We examine eight dimensions of de facto capital account openness. Four measures based on onshore and offshore prices test the law of one price. Among the four quantity measures, we introduce two new ones into the debate: the openness of consolidated banking systems and the internationalisation of currencies. Generally, the measures show both economies becoming more financially open over time. In six of the eight dimensions, the Indian economy appears to be more open financially. Nevertheless, policy continues to segment onshore and offshore markets in both and policymakers face challenges in further financial integration.

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Bibliographic Info

Paper provided by Bank for International Settlements in its series BIS Working Papers with number 410.

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Length: 35 pages
Date of creation: Apr 2013
Date of revision:
Handle: RePEc:bis:biswps:410

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Keywords: Capital account openness; financial integration; law of one price; foreign exchange market; currency internationalisation; Chinn-Ito; Lane-Milesi-Ferretti;

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Cited by:
  1. Guglielmo Maria Caporale & Michael Donadelli & Alessia Varani, 2014. "International Capital Markets Structure, Preferences and Puzzles: The US-China Case," CESifo Working Paper Series, CESifo Group Munich 4669, CESifo Group Munich.
  2. Hooley, John, 2013. "Bringing down the Great Wall? Global implications of capital account liberalisation in China," Bank of England Quarterly Bulletin, Bank of England, Bank of England, vol. 53(4), pages 304-315.
  3. Dong He & Robert N McCauley, 2013. "Transmitting global liquidity to East Asia: policy rates, bond yields, currencies and dollar credit," BIS Working Papers, Bank for International Settlements 431, Bank for International Settlements.
  4. Robert N McCauley & Chang Shu & Guonan Ma, 2014. "Non-deliverable forwards: 2013 and beyond," BIS Quarterly Review, Bank for International Settlements, Bank for International Settlements, March.

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