the analysis model of global flow of funds in theory and practice nan zhang hiroshima shudo...
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The Analysis Model of Global Flow of Funds in
Theory and Practice
Nan Zhang
Hiroshima Shudo University
International Statistics Forum 2006, (Beijing, J une 2006)
Contents
• A doubtful recycling in global flow of funds
• Model building
• Overseas flow of funds in China
• The conclusion of the analysis
Source: Flow of Funds Accounts of the United States , March 2006
- 1000
- 500
0
500
1000
1500
90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5
External flow of funds in U.S. (US$ billions)
InflowsOutfliwsCurrent account
- 3
- 2
- 1
0
1
2
3
4
5
76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4
Developing countries continue to export capital (% of GDP)
Developing countriesLow- income countries
Source: World Bank. Global Development Finance 2005
Overseas fund flow is increasing in China (100 million RMB)
- 20000
- 15000
- 10000
- 5000
0
5000
10000
15000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
FIFO
Source: The People’s Bank of China Quarterly Statistical Bulletin
The survey of research literature
• H.Chenery & M.Strout,1966 (Two-Gap model)
• Mundell-Fleming model, 1968
• K. Marwah & L. R. Klein model,1983
• 石田定夫 ,1993 (『日本経済の資金循環』)
• 桜川 ,2002 (「国際移動の動学モデル」)• 渋谷浩 ,2003( 「経済発展と資本逃避」 )
What is global flow of funds?• 石田 (1993) pp.170-171 national flow of funds → global flow of funds international capital movements → global flow of funds
• 山本 (2002) p39 各国の経常収支不均衡がどのよう国際資本移動によってファイナン
スされているかを表したものであり、また国際資本取引における各国の相互依存関係の特徴を単純化したものである。
• 張 (2005) p 32 国内の貯蓄投資バランスと資金過不足に結び付けて、経常収支
不均衡をファイナンスするなどの対外金融資産調達と運用のために引起された国際資金の流れであり、また国内と国際の面から経常収支と資本収支における各国の相互依存関係の特徴を表したものである。
The theoretical outline of analysis
• Savings-investment and current account balance
• The financial markets balance
• Net fund outflows
LAIMEXIS )(
FRAFIFOFOFI oodd
CAAOIPIDIFIFO oo )(
Theoretical model
S t r u c t u r a l e q u a t i o n s :
① tttt RbYbbYS 1311211/
② ttt RbKbYbbI 241232221 2
③ ttt YbCPIbbIM 333231
④ ttt YbREERbbEX 434241
⑤ tttttt DbFDIbREERbPERbYbbFI 5655545315251
⑥ tttt FIbREERbYRbbFDI 646316261
⑦ ttUStt RbriskbrbondbbOPI 74737271
⑧ tttt RbCAbRFLbbOIO 848318281
Theoretical model
⑨ tttt riskbYRbRbbPER 941939291
⑩ ttt
tt FObRCBb
GDPV
MbbR 104103102101 ln
⑪ tttt EXbSRbREERbbREX 114113112111
⑫ ttt FIbCAbbFRA 123122121
⑬ tttttt DbFFRbCFbPIbFRAbbFO 136135134133132131
Identities
⑭ ttt FIFONFI
⑮ ttt EXIMCA
⑯ ttttt GICNFIY
The method of model building• • Identification Estimation Evaluation Prediction
• Three Stage Least Squares method: 3SLS
BPLMIS BPFFIS
Data:
• Flow of Funds Account, FOF;• Balance of Payments, BOP; • International Financial Statistics, IFS ;• World Economic Outlook, WEC;• Bank for International Settlements, BIS; ( Quarterly Locational International Banking Statistic
s ) ( Semi-annual Consolidated International Banking Statistics ) • Global Development Finance, GDF ;• The Institute of International Finance, IIF; • Treasury International Capital, TIC);
Overseas flow of funds in China (100 million RMB)
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Inflows (A) 1,667 2,929 5,326 5,654 5,901 5,005 2,976 3,808 4,877 3,488 4,236 5,807 8712Outflows (B) 1,681 1,604 2,514 2,427 2,588 3,109 3,431 3,041 4,643 557 1,464 1,224 - 551Net inflows (A-B) -14 1,325 2,811 3,228 3,313 1,896 -454 767 234 2,931 2,772 4,583 9263
FRA (C) 117 -102 -2,631 -1,877 -2,632 -2,961 -532 -704 -873 -3,917 -6,250 - 9,686 - 17080Errors & O. (D) -456 -565 -832 -1,487 -1,294 -1,405 -1,372 -1,361 -1,056 -450 550 1,377 2135NFI (E) -353 658 -652 -137 -612 -2,471 -2,359 -1,298 -1,696 -1,436 -2,928 - 3,726 - 5682Note: A- B)+C+D=E( Source: The People’s Bank of China Quarterly Statistical Bulletin
The characteristics of overseas fund flows in China, 1992 – 2004: (100 million RMB)
• Balance of savings-investment : 1,194• Current-account: 1,755• Overseas capital inflow: 4,645• Domestic capital outflow: 2,133• Foreign reserve assets: -3,779• Capital flight : - 478• Net capital inflows 2,512 – FER3,779 – Capital flight478
= -1,745 ( continue to export capital per annum )
A doubtful recycling in China
• The constitution of foreign reserve assets
CA=1755, FRA=3779
• The matter of financial control system
• The risk of the fund flows
0
100
200
300
400
500
600
700
800
900
99 0 1 2 3 4 5 6
Leading to record levels of reserves in China (US$ billionds)
U.S.Transactions with Foreigners in Long- Term Securites by China(US$million)
0
5000
10000
15000
20000
25000
30000
35000
40000
Treasury Bonds & Notes
Gov't Agency Bonds
Corp. Bonds
Corp. Stocks
Foreign Bonds
Foreign Stocks
Source: http://www.ustreas.gov/tic/
Source: World Bank. Global Development Finance 2005
Many countries have appreciated against the dollar (%)2002.1 2005.1~
- 100
- 80
- 60
- 40
- 20
0
20
40
60
80
100
The SYSLIN Procedure
Three-Stage Least Squares Estimation
Model SAEVING
Parameter Standard
Variable DF Estimate Error t Value Pr > |t|
Intercept 1 0.043753 0.037190 1.18 0.2732
Y1 1 1.646E-6 2.023E-7 8.14 0.0001
R 1 0.026773 0.002723 9.83 0.0001
Model INVEST
Parameter Standard
Variable DF Estimate Error t Value Pr > |t|
Intercept 1 -34615.2 5027.563 -6.89 0.0002
Y2 1 0.478428 0.092649 5.16 0.0013
K1 1 0.885860 0.045474 19.48 0.0001
R 1 1697.219 366.1342 4.64 0.0024
Model IMPORT
Parameter Standard
Variable DF Estimate Error t Value Pr > |t|
Intercept 1 -9531.44 997.3921 -9.56 0.0001
CPI 1 69.73398 8.722656 7.99 0.0001
Y 1 0.048123 0.002109 22.82 0.0001
Model EXPORT
Parameter Standard
Variable DF Estimate Error t Value Pr > |t|
Intercept 1 1832.190 436.1712 4.20 0.0030
REER 1 -41.2018 5.364421 -7.68 0.0001
Y 1 0.048414 0.001778 27.23 0.0001
Model INFLOWS
Parameter Standard
Variable DF Estimate Error t Value Pr > |t|
Intercept 1 9086.756 2699.549 3.37 0.0200
Y1 1 0.056308 0.012775 4.41 0.0070
PER 1 -3.10092 2.634085 -1.18 0.2921
REER 1 -216.366 31.97071 -6.77 0.0011
FDI 1 3.374798 0.574282 5.88 0.0020
D 1 -1186.51 465.4234 -2.55 0.0513
Model FDI
Parameter Standard
Variable DF Estimate Error t Value Pr > |t|
Intercept 1 -3949.20 408.5017 -9.67 0.0001
YR1 1 139.0042 8.021643 17.33 0.0001
FI 1 0.140958 0.007698 18.31 0.0001
REER 1 57.91918 3.587181 16.15 0.0001
Model RATES
Parameter Standard
Variable DF Estimate Error t Value Pr > |t|
Intercept 1 8.626042 1.238897 6.96 0.0002
MR 1 -10.1647 2.123998 -4.79 0.0020
RCB 1 0.156941 0.125606 1.25 0.2516
FO 1 0.000077 0.000032 2.43 0.0453
Model EXCHANGE
Parameter Standard
Variable DF Estimate Error t Value Pr > |t|
Intercept 1 8.833047 0.076984 114.74 0.0001
REER 1 -0.00502 0.000583 -8.61 0.0001
SR 1 -0.13278 0.115058 -1.15 0.2864
EX 1 -2.73E-6 3.957E-6 -0.69 0.512
Model RESERVE
Parameter Standard
Variable DF Estimate Error t Value Pr > |t|
Intercept 1 4151.362 699.1684 5.94 0.0003
CA 1 -7.87594 1.710688 -4.60 0.0017
FI 1 -1.44173 0.175694 -8.21 0.0001
Model OUTFLOWS
Parameter Standard
Variable DF Estimate Error t Value Pr > |t|
Intercept 1 2210.028 668.6175 3.31 0.0213
FRA 1 -0.50888 0.089714 -5.67 0.0024
PI 1 0.047163 0.033330 1.42 0.2162
CF 1 2.256186 0.563783 4.00 0.0103
FFR 1 854.2071 180.3776 4.74 0.0052
D 1 1043.989 362.2353 2.88 0.0345
The shock of increase in FRA
-5,000
0
5,000
10,000
15,000
20,000
25,000
30,000
FRAPFRA
Growth rate of CA 5% (from 2005 to 2010)
Growth rate of FI 8%
Federal funds rate 1.46 → 2.14
REX 8.028 → 6.894
The conclusion of the analysis
• Balance of savings-investment :
• Current-account:
• International capital inflows:
• Net outflows from china: Foreign reserve assets; Capital flight
• The influence of the American factor
Thank You !Thank You ! To Comment or obtain a copy of full paper:To Comment or obtain a copy of full paper:
[email protected]@shudo-u.ac.jp