{"title":"Time-varying effects of macro shocks on cross-border capital flows in China's bond market","authors":"Xiao Dong , Mingzhe Yu","doi":"10.1016/j.iref.2024.103720","DOIUrl":null,"url":null,"abstract":"<div><div>As the most innovative initiative for the liberalization of Chinese bond market, the Bond Connect program greatly promotes the participation of cross-border capitals. In this paper, by analyzing the changes in the number of foreign investors entering the market, the volume of bond trading and the total amount of bond holdings, we find that the Bond Connect has become the dominant platform for foreign investors to participate in the Chinese bond market. Besides, using a TVP-VAR model based on a set of monthly time-series data from July 2017 to September 2023, we identify the dynamic impacts of four macroeconomic shocks: bond market forces, economic growth forces, monetary policy shocks, and economic policy uncertainty, on net capital inflows into the Chinese bond market. The results indicate that all these macroeconomic forces significantly affect capital inflows, with bond market forces exerting the greatest impact. Moreover, the direction, magnitude, and trends of each macro factor's impact on net capital inflows exhibit distinct characteristics.</div></div>","PeriodicalId":14444,"journal":{"name":"International Review of Economics & Finance","volume":"96 ","pages":"Article 103720"},"PeriodicalIF":4.8000,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Review of Economics & Finance","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1059056024007123","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
As the most innovative initiative for the liberalization of Chinese bond market, the Bond Connect program greatly promotes the participation of cross-border capitals. In this paper, by analyzing the changes in the number of foreign investors entering the market, the volume of bond trading and the total amount of bond holdings, we find that the Bond Connect has become the dominant platform for foreign investors to participate in the Chinese bond market. Besides, using a TVP-VAR model based on a set of monthly time-series data from July 2017 to September 2023, we identify the dynamic impacts of four macroeconomic shocks: bond market forces, economic growth forces, monetary policy shocks, and economic policy uncertainty, on net capital inflows into the Chinese bond market. The results indicate that all these macroeconomic forces significantly affect capital inflows, with bond market forces exerting the greatest impact. Moreover, the direction, magnitude, and trends of each macro factor's impact on net capital inflows exhibit distinct characteristics.
期刊介绍：
The International Review of Economics & Finance (IREF) is a scholarly journal devoted to the publication of high quality theoretical and empirical articles in all areas of international economics, macroeconomics and financial economics. Contributions that facilitate the communications between the real and the financial sectors of the economy are of particular interest.
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