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Effects of Capital Flow on the Equity and Housing Markets in Hong Kong

Author

Listed:
  • Yin-Wong Cheung

    (City University of Hong Kong)

  • Kenneth K. Chow

    (Hong Kong Monetary Authority)

  • Matthew S. Yiu

    (Hong Kong Institute for Monetary Research)

Abstract

The revival of strong capital flows to emerging economies in the aftermath of the Global Financial Crisis in 2008-09 has rekindled the debate on the adverse effects of excessive capital inflows. We study the effects of official and illicit capital flows on Hong Kong, which is a small and open economy with minimal restrictions on cross-border fund movements. To illustrate the effects of different types of capital flows, we study official and illicit flows on Hong Kong¡¯s equity and residential housing markets. It is found that the official and illicit capital flow measures reflect different facets of flow movements and exhibit differential effects on the equity and residential housing markets. The results highlight the complexity of managing capital flows, and the relevance of policies targeting specific sectors.

Suggested Citation

  • Yin-Wong Cheung & Kenneth K. Chow & Matthew S. Yiu, 2017. "Effects of Capital Flow on the Equity and Housing Markets in Hong Kong," Working Papers 012017, Hong Kong Institute for Monetary Research.
    • Handle: RePEc:hkm:wpaper:012017
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    Cited by:

    1. Charles Ka Yui LEUNG & Joe Cho Yiu NG, 2018. "Macro Aspects of Housing," ISER Discussion Paper 1030, Institute of Social and Economic Research, Osaka University.
    2. Cheung, Yin-Wong & Steinkamp, Sven & Westermann, Frank, 2020. "Capital flight to Germany: Two alternative measures," Journal of International Money and Finance, Elsevier, vol. 102(C).
    3. Charles Ka Yui Leung & Joe Cho Yiu Ng & Edward Tang, 2020. "Why is the Hong Kong Housing Market Unaffordable? Some Stylized Facts and Estimations," Globalization Institute Working Papers 380, Federal Reserve Bank of Dallas.
    4. Charles Ka Yui Leung, 2017. "Special issue on housing and financial stability: An introduction," Pacific Economic Review, Wiley Blackwell, vol. 22(3), pages 273-275, August.
    5. Taghizadeh-Hesary, Farhad & Yoshino, Naoyuki & Chiu, Alvin, 2019. "Internal and External Determinants of Housing Price Booms in Hong Kong, China," ADBI Working Papers 948, Asian Development Bank Institute.

    More about this item

    Keywords

    Capital flows; currency-based measure; illicit flow measure; equity market; real estate market;

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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