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Regional Capital Mobility in China: An Endogenous Parameter Approach

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  • Te Lai

Abstract

In this paper we empirically evaluate inter-regional capital mobility in China from 1978 to 2012. We measure the degree of capital mobility as the ability of regions, each as a representative consumer, to engage in intertemporal consumption smoothing through running external imbalances. We estimate a correlated random coefficient model which takes into account the potential correlation of capital mobility with output. Our results show that barriers to capital mobility across regions are still high in China. However, there is a slight increase in capital mobility over time. After 2000, the improvement of the degree of capital mobility becomes stagnant. This may reflect the prevalence of capital market distortion in China.

Suggested Citation

  • Te Lai, 2015. "Regional Capital Mobility in China: An Endogenous Parameter Approach," Applied Economics and Finance, Redfame publishing, vol. 2(3), pages 63-75, August.
  • Handle: RePEc:rfa:aefjnl:v:2:y:2015:i:3:p:63-75
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    References listed on IDEAS

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    More about this item

    Keywords

    Regional capital mobility; China capital market integration; Permanent income model; Endogenous parameter random coefficient model;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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