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Capital Flight: China's Experience

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  • Yin-Wong Cheung

    (University of California, Santa Cruz ,Hong Kong Institute for Monetary Research)

  • XingWang Qian

    (SUNY, Buffalo State College)

Abstract

We study the empirical determinants of China's capital flight. In addition to the covered interest differential, our empirical exercise includes a rather exhaustive list of macroeconomic variables and a few institutional factors. Overall, our regression exercise shows that China's capital flight is quite well explained by its own history and covered interest differentials. The other possible determinants offer relatively small additional explanatory power. It is also found that China's capital flight responds differently to the components of covered interest differentials and to the positive and negative components of these variables. The response pattern, however, depends on the choice of data frequency. The general impression is that the monthly results are more intuitive than the quarterly ones.

Suggested Citation

  • Yin-Wong Cheung & XingWang Qian, 2010. "Capital Flight: China's Experience," Working Papers 062010, Hong Kong Institute for Monetary Research.
  • Handle: RePEc:hkm:wpaper:062010
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    Cited by:

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    3. Yanping Zhao & Zaghum Umar & Xuan Vinh Vo, 2021. "Return and volatility connectedness of Chinese onshore, offshore, and forward exchange rate," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(11), pages 1843-1860, November.
    4. 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).
    5. Sebri, Maamar & Dachraoui, Hajer, 2020. "Resources bless BRICS," MPRA Paper 100423, University Library of Munich, Germany.
    6. Cheung, Yin-Wong & Steinkamp, Sven & Westermann, Frank, 2016. "China's capital flight: Pre- and post-crisis experiences," Journal of International Money and Finance, Elsevier, vol. 66(C), pages 88-112.
    7. Chen, Jinzhao & Qian, Xingwang, 2016. "Measuring on-going changes in China's capital controls: A de jure and a hybrid index data set," China Economic Review, Elsevier, vol. 38(C), pages 167-182.
    8. Liew, Siew-Ling, 2016. "Review on Determinants of Capital Flight," MPRA Paper 70445, University Library of Munich, Germany.
    9. Wang, Yi David, 2012. "Convertibility restriction in China s foreign exchange market and its impact on forward pricing," BOFIT Discussion Papers 28/2012, Bank of Finland, Institute for Economies in Transition.
    10. Heydari, Hassan & Jariani, Farzaneh, 2020. "Analyzing Effective Factors of Capital Outflow from the Middle East and North African Countries (MENA)," MPRA Paper 104547, University Library of Munich, Germany.
    11. Ahmed Imran Hunjra & Hasnain Mehmood & Haroon Bakari, 2018. "Co-Movement between Macroeconomic Variables and Capital Flight," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(9), pages 1185-1195, September.
    12. Wang, Yi David, 2015. "Convertibility restriction in China’s foreign exchange market and its impact on forward pricing," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 616-631.
    13. Yi Wang, 2010. "Convertibility Restriction Determination in China's Foreign Exchange Market and its Impact of Forward Pricing," Discussion Papers 09-024, Stanford Institute for Economic Policy Research.
    14. Liew, Siew-Ling, 2016. "Determinants of Foreign Direct Investment," MPRA Paper 70447, University Library of Munich, Germany.

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    More about this item

    Keywords

    Covered Interest Differential; Forward Premium; Expected Depreciation; Asymmetric Response; Macro Determinants;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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