Short-Term International Capital Flows: Empirical Evidence from China

Junjun Tan, Mansor Jusoh, Tamat Sarmidi

Abstract


ABSTRACT

The present study investigates the dynamic relationship between short-term international capital flows and macroeconomic variables in China from 1999 until 2011. Employing the bounds test, autoregressive distributed lag (ARDL) model and Granger causality tests, the results show that interest rate differentials and real estate prices are the main driving forces for short-term international capital movements. The Granger causality test indicates that interest rate differentials and exchange rates Granger cause the short-term international capital flows of China in the short run; while bidirectional causal relationships are found among short-term international capital flows and interest rate differentials; effective exchange rates; stock prices; and real estate prices in the long run.

Keywords: Short-term international capital flows; Bound test; ARDL; Granger causality test

ABSTRAK

Kajian ini meneliti kewujudan hubungan dinamik antara aliran modal antarabangsa jangka pendek dengan pemboleh ubah makro ekonomi di China berdasarkan data dari tahun 1999 hingga 2011. Dengan menggunakan ujian Batas, model Autoregresif Lat Teragih(ARDL) dan ujian penyebab Granger, hasil kajian mendapati bahawa dalam jangka masa panjang, perbezaan kadar faedah dan harga hartanah adalah pemacu kepada aliran modal antarabangsa jangka pendek. Keputusan ujian penyebab Granger menunjukkan dalam jangka masa pendek, perbezaan kadar faedah dan kadar pertukaran adalah penyebab Granger kepada aliran modal antarabangsa. Sebaliknya, dalam jangka masa panjang, wujud hubungan penyebab Granger dua hala antara aliran modal antarabangsa jangka pendek dengan pemboleh ubah perbezaan kadar faedah, kadar pertukaran berkesan, harga saham dan harga hartanah.

Kata Kunci: Aliran keluar modal antarabangsa jangka-pendek; Ujian Batas; ARDL; Ujian penyebab Granger

 


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