Re-measuring International Short-term Capital Flow into China with Varying Methods

ZHANG Ming

Institute of World Economics and Politics, Chinese Academy of Social Sciences, Beijing, China

Abstract:

This paper first conducts a systematic review of domestic and foreign scholars’ approaches to predicting short-term capital flows, then employs a combination
of both direct and indirect methods to carry out its analysis. Three kinds of indicators, both specific and general, are applied in both methods. Thorough consideration is given to short-term international capital inflow from trade, other current account items, capital account, and errors and omissions, as well as other channels through which short term capital might accrue to a nation’s balance. Based on a comprehensive comparison of year-on-year data, this paper also estimates monthly data using a simplified, indirect calculation approach. Estimates show that, despite a degree of difference in results between methods, most estimates are highly consistent for a given period. Based on monthly estimates, we conclude that turbulence in international financial markets (i.e., the United States subprime mortgage crisis and the European sovereign debt crisis) has had a major impact on China’s short-term capital flow.

Key words: short-term international capital flows, direct method, indirect method, scale measurement

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