Capital Flight: China's Experience

39 Pages Posted: 3 Feb 2010

See all articles by Yin-Wong Cheung

Yin-Wong Cheung

University of California, Santa Cruz - Department of Economics

Xingwang Qian

State University of New York, Buffalo State

Multiple version iconThere are 2 versions of this paper

Date Written: January 2010

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.

Keywords: covered interest differential, forward premium, expected depreciation, asymmetric response, macro determinants

JEL Classification: F30, F32, G15

Suggested Citation

Cheung, Yin-Wong and Qian, Xingwang, Capital Flight: China's Experience (January 2010). CESifo Working Paper Series No. 2931, Available at SSRN: https://ssrn.com/abstract=1546971 or http://dx.doi.org/10.2139/ssrn.1546971

Yin-Wong Cheung (Contact Author)

University of California, Santa Cruz - Department of Economics ( email )

Engineering 2, Department of Economics
University of California
Santa Cruz, CA 95064
United States
831-459-5077 (Fax)

Xingwang Qian

State University of New York, Buffalo State ( email )

Classroom BLDG B232
1300 Elmwood Ave
Buffalo, NY 14222
United States
716-878-6031 (Phone)
716-878-6907 (Fax)

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