A provincial view of global imbalances: regional capital flows in China

Samuel Cudré; Mathias Hoffmann

doi:10.1007/s10290-017-0278-0

A provincial view of global imbalances: regional capital flows in China

Samuel Cudré, Mathias Hoffmann^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

2 Citations (Scopus)

Abstract

We model capital flows among Chinese provinces. A version of the present value model of the current account (PVMCA) with non-tradable goods and a savings wedge accounts for around 80% of the variation in inter-provincial capital flows over the 1986–2010 period. The PVMCA also allows us to identify the channels of external adjustment in capital flows at the province-level: variation in intertemporal prices (domestic and international interest rates, the provincial real exchange rate) and intertemporal variation in quantities (output, investment and government spending). We find that cross-province variation in the importance of these channels is correlated with the importance of private and state-owned enterprises and demographic factors. We discuss implications of our results for global imbalances in capital flows.

Original language	English
Pages (from-to)	573-599
Number of pages	27
Journal	Review of World Economics
Volume	153
Issue number	3
DOIs	https://doi.org/10.1007/s10290-017-0278-0
Publication status	Published - 1 Aug 2017

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abstract = "We model capital flows among Chinese provinces. A version of the present value model of the current account (PVMCA) with non-tradable goods and a savings wedge accounts for around 80% of the variation in inter-provincial capital flows over the 1986–2010 period. The PVMCA also allows us to identify the channels of external adjustment in capital flows at the province-level: variation in intertemporal prices (domestic and international interest rates, the provincial real exchange rate) and intertemporal variation in quantities (output, investment and government spending). We find that cross-province variation in the importance of these channels is correlated with the importance of private and state-owned enterprises and demographic factors. We discuss implications of our results for global imbalances in capital flows.",

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T1 - A provincial view of global imbalances

T2 - regional capital flows in China

AU - Cudré, Samuel

AU - Hoffmann, Mathias

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N2 - We model capital flows among Chinese provinces. A version of the present value model of the current account (PVMCA) with non-tradable goods and a savings wedge accounts for around 80% of the variation in inter-provincial capital flows over the 1986–2010 period. The PVMCA also allows us to identify the channels of external adjustment in capital flows at the province-level: variation in intertemporal prices (domestic and international interest rates, the provincial real exchange rate) and intertemporal variation in quantities (output, investment and government spending). We find that cross-province variation in the importance of these channels is correlated with the importance of private and state-owned enterprises and demographic factors. We discuss implications of our results for global imbalances in capital flows.

AB - We model capital flows among Chinese provinces. A version of the present value model of the current account (PVMCA) with non-tradable goods and a savings wedge accounts for around 80% of the variation in inter-provincial capital flows over the 1986–2010 period. The PVMCA also allows us to identify the channels of external adjustment in capital flows at the province-level: variation in intertemporal prices (domestic and international interest rates, the provincial real exchange rate) and intertemporal variation in quantities (output, investment and government spending). We find that cross-province variation in the importance of these channels is correlated with the importance of private and state-owned enterprises and demographic factors. We discuss implications of our results for global imbalances in capital flows.

KW - Capital flows

KW - China

KW - Chinese provinces

KW - Current account

KW - External adjustment

KW - Global imbalances

KW - Present-value models

KW - Regional business cycles

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DO - 10.1007/s10290-017-0278-0

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VL - 153

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JO - Review of World Economics

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A provincial view of global imbalances: regional capital flows in China

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