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ID099911
Title ProperHot money and business cycle volatility
Other Title Informationevidence from China
LanguageENG
AuthorGuo, Feng ;  Huang, Ying
Publication2010.
Summary / Abstract (Note)This paper investigates the link between hot money and business cycle volatility in China from January 1997 to December 2009. Using the structural vector error correction model, we find a considerable degree of long-run cointegration and bidirectional causality effects between hot money and business cycle volatility. The speculative shocks are found to temporarily promote China's economic growth, but also to exacerbate business cycle volatility. The liquidity shock stemming from hot money is shown to be the primary factor responsible for the significantly enhanced fluctuation in business cycles during the most recent global financial crisis period. This could be detrimental to the smooth operation of financial markets. Therefore, in forming future policies, it is critical for policy-makers to take precautions against the speculative factors.
`In' analytical NoteChina and World Economy vol. 18, No. 6; Nov-Dec 2010: p.73-89
Journal SourceChina and World Economy vol. 18, No. 6; Nov-Dec 2010: p.73-89
Key WordsBusiness Cycle ;  China ;  Hot Money