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Dimensions of financial integration in Greater China: money markets, banks and policy effects
Author(s) -
Cheung YinWong,
Chinn Menzie D.,
Fujii Eiji
Publication year - 2005
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.264
Subject(s) - china , economics , monetary economics , volatility (finance) , financial market , capital market , interest rate parity , exchange rate , empirical evidence , financial integration , interest rate , renminbi , international economics , financial economics , finance , philosophy , epistemology , political science , law
The financial linkages between the People's Republic of China (hereafter ‘China’) and the other Greater China economies of Hong Kong and Taiwan are assessed, and compared against those of China with Singapore, Japan and the United States. For both sets of links, there is evidence that ex post uncovered interest parity tends to hold over longer periods, and the magnitude of the parity deviations is shrinking over time. The deviations depend upon the extent of capital controls, and in certain cases, exchange rate volatility. However, while the money markets of China are increasingly linked to money markets in the rest of the world, our empirical results suggest that the banking sector—the main source of capital for Chinese firms—remains insulated. Copyright © 2005 John Wiley & Sons, Ltd.