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  • Capital Account Liberalisation by China and the Effects on Global FDI and Trade

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    Accepted Manuscript (AM)
    Author(s)
    Verikios, George
    Griffith University Author(s)
    Verikios, George
    Year published
    2018
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    Abstract
    We model the partial liberalisation of the capital account by China using a dynamic computable general equilibrium model of the world economy. Our results indicate that a reduced capital controls on foreign direct investment (FDI) would lead to a significant increase in FDI capital in China and a significant reduction in the cost of capital in China relative to the rest of the world. Furthermore, we observe an increase in capital stocks in most regions, which benefits most regions in terms of GDP and GNP. The Chinese economy grows by 3.3% driven by a significant fall in the rental price of capital that, in turn, lowers ...
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    We model the partial liberalisation of the capital account by China using a dynamic computable general equilibrium model of the world economy. Our results indicate that a reduced capital controls on foreign direct investment (FDI) would lead to a significant increase in FDI capital in China and a significant reduction in the cost of capital in China relative to the rest of the world. Furthermore, we observe an increase in capital stocks in most regions, which benefits most regions in terms of GDP and GNP. The Chinese economy grows by 3.3% driven by a significant fall in the rental price of capital that, in turn, lowers domestic costs, causes a real depreciation of the exchange rate and thus increased exports relative to other regions. We also observe an across-the-board increase in the saving rate driven by the rise in the price of consumption relative to investment (saving) in all regions.
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    Journal Title
    Global Economic Review
    Volume
    47
    Issue
    3
    DOI
    https://doi.org/10.1080/1226508X.2018.1436459
    Copyright Statement
    © 2018 Taylor & Francis (Routledge). This is an Accepted Manuscript of an article published by Taylor & Francis in Global Economic Review on Volume 47, 2018 - Issue 3, available online: https://doi.org/10.1080/1226508X.2018.1436459
    Subject
    Applied economics
    Applied economics not elsewhere classified
    Publication URI
    http://hdl.handle.net/10072/381758
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    • Journal articles

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