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Title: Capital account liberalization and choice of exchange rate regimes: The case of China
Keywords: Capital Account, China, Currency Substitution, Developing Countries, Economic Liberalization, Exchange Rate.
Issue Date: 13-Jan-2004
Source: GUO LUJIAN (2004-01-13). Capital account liberalization and choice of exchange rate regimes: The case of China. ScholarBank@NUS Repository.
Abstract: In this thesis, three closely related issues of capital account liberalization in China have been studied. They are the order of capital account liberalization, the choice of exchange rate regimes and one possible side-effect of liberalizationa??currency substitution. The principal argument of capital account liberalization is how to execute such policies. From three different aspects, government finance, domestic money & capital market and the foreign related economy, and comparing with other developing countriesa?? experience, we conclude that it is still not advisable for China to take the final stepa??to liberalize its capital account. Based on 87 countriesa?? exchange rate arrangement in three separate years, a Logit model is used to examine the determinants of choosing the appropriate exchange rate regimes. The empirical prediction suggests Chinaa??s current fixed foreign exchange arrangement is not compatible with its macroeconomic variables. In the last part, the issue of currency substitution is being examined by the cointegration and error correction methodology. The empirical results indicate the existence of currency substitution in China, thus a more precautious liberalization process should be taken. Our study of the capital account liberalization points out some economic shortcomings in China, and gives out some brief policy suggestions.
Appears in Collections:Master's Theses (Open)

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