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The Evolving Role of China and India in the Global Financial System

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  • Philip Lane

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  • Sergio Schmukler

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Abstract

Three main features characterize the international financial integration of China and India. First, while only having a small global share of privately-held external assets and liabilities, these countries are large holders of official reserves. Second, their international balance sheets are highly asymmetric: both are “short equity, long debt.” Third, China and India have improved their net external positions over the last decade although neoclassical models would predict them to be net borrowers. We argue that domestic financial policies are key to understanding these patterns and the future role of China in the international financial system. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Philip Lane & Sergio Schmukler, 2007. "The Evolving Role of China and India in the Global Financial System," Open Economies Review, Springer, vol. 18(4), pages 499-520, September.
  • Handle: RePEc:kap:openec:v:18:y:2007:i:4:p:499-520 DOI: 10.1007/s11079-007-9044-6
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Philip R. Lane IIIS, Trinity College Dublin and CEPR, 2009. "Innovation and Financial Globalisation," The Institute for International Integration Studies Discussion Paper Series iiisdp299, IIIS.
    2. Luigi Bonatti & Andrea Fracasso, 2009. "The evolution of the Sino-American Co-dependency: modelling a regime switch in a growth setting," Department of Economics Working Papers 0905, Department of Economics, University of Trento, Italia.
    3. Didier, Tatiana & Schmukler, Sergio L., 2013. "The financing and growth of firms in China and India: Evidence from capital markets," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 111-137.
    4. Chang Shu & Dong He & Jinyue Dong & Honglin Wang, 2016. "Regional pull vs global push factors: China and US influence on Asia-Pacific financial markets," BIS Working Papers 579, Bank for International Settlements.
    5. Bonatti, Luigi & Fracasso, Andrea, 2013. "Regime switches in the Sino-American co-dependency: Growth and structural change in China," Structural Change and Economic Dynamics, Elsevier, vol. 25(C), pages 1-32.
    6. Chang Shu & Dong He & Honglin Wang & Jinyue Dong, 2015. "The influence of Chinese and US financial markets on Asia-Pacific," BIS Papers chapters,in: Bank for International Settlements (ed.), Cross-border Financial Linkages: Challenges for Monetary Policy and Financial Stability, volume 82, pages 7-24 Bank for International Settlements.
    7. Philip R. Lane, 2008. "The Macroeconomics of Financial Integration: A European Perspective," The Institute for International Integration Studies Discussion Paper Series iiisdp265, IIIS.
    8. repec:kap:openec:v:28:y:2017:i:3:d:10.1007_s11079-016-9430-z is not listed on IDEAS
    9. Joyce, Joseph, 2015. "External Balance Sheets as Countercyclical Crisis Buffers," MPRA Paper 66039, University Library of Munich, Germany.

    More about this item

    Keywords

    Financial integration; Capital flows; China; India; World economy; F02; F30; F31; F32; F33; F36;

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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