International Statistics Forum 2006, (Beijing, June 2006) The Analysis Model of Global Flow of Funds in Theory and Practice Nan Zhang Hiroshima Shudo University Contents • A doubtful recycling in global flow of funds • Model building • Overseas flow of funds in China • The conclusion of the analysis External flow of funds in U.S. (US$ billions) 1500 Inflows Outfliws Current account 1000 500 0 -500 -1000 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 Source: Flow of Funds Accounts of the United States , March 2006 5 Developing countries continue to export capital (% of GDP) 5 4 Developing countries Low-income countries 3 2 1 0 -1 -2 -3 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 Source: World Bank. Global Development Finance 2005 Overseas fund flow is increasing in China (100 million RMB) FI FO 15000 10000 5000 0 -5000 -10000 -15000 -20000 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 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)ｐ32 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 (S  I )  EX  IM  A  L • The financial markets balance FId  FOd  FOo  FIo  FRA • Net fund outflows ( FOo  FIo )  DI  PI  OI  CAA Theoretical model Structural equations: ① ② S t / Yt  b11  b12 Yt 1  b13 Rt I t  b21  b22 Y 2  b23 K t 1  b24 Rt ③ IM t  b31  b32 CPI t  b33Yt ④ EX t  b41  b42 REER t  b43Yt ⑤ ⑥ ⑦ ⑧ FI t  b51  b52 Yt 1  b53 PER t  b54 REER t  b55 FDI t  b56 Dt FDI t  b61  b62 YRt 1  b63 REER t  b64 FI t OPI t  b71  b72 rbond tUS  b73 risk t  b74 Rt OIO t  b81  b82 RFL t 1  b83 CAt  b84 Rt Theoretical model ⑪ PERt  b91  b92 Rt  b93YRt 1  b94 risk t Mt Rt  b101  b102 ln  b103 RCBt  b104 FOt GDPVt REX t  b111  b112 REERt  b113 SRt  b114 EX t ⑫ FRAt  b121  b122 CAt  b123 FI t ⑬ FOt  b131  b132 FRAt  b133 PI t  b134 CFt  b135 FFRt  b136 Dt ⑨ ⑩ Identities ⑭ NFI t  FOt  FI t ⑮ CAt  IM t EX t ⑯ Yt  NFI t  C t  I t  Gt The method of model building • IS  LM  BP • Identification Evaluation IS  FF  BP Estimation Prediction • Three Stage Least Squares method: 3SLS 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 Statistics）（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 8712 Outflows (B) 1,681 1,604 2,514 2,427 2,588 3,109 3,431 3,041 4,643 557 1,464 1,224 -551 Net inflows (A-B) -14 1,325 2,811 3,228 3,313 1,896 -454 767 234 2,931 2,772 4,583 9263 (C) 117 -102 -2,631 -1,877 -2,632 -2,961 -532 -704 -873 -3,917 -6,250 -9,686 -17080 Errors & O. (D) -456 -565 -832 -1,487 -1,294 -1,405 -1,372 -1,361 -1,056 -450 550 1,377 2135 NFI -353 658 -652 -137 -612 -2,471 -2,359 -1,298 -1,696 -1,436 -2,928 -3,726 -5682 FRA (E) Note: （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 Leading to record levels of reserves in China (US$ billionds) 900 800 700 600 500 400 300 200 100 0 99 0 1 2 3 4 5 6 U.S.Transactions with Foreigners in Long-Term Securites by China (US$million) 40000 35000 30000 25000 20000 Treasury Bonds & Notes Gov't Agency Bonds Corp. Bonds Corp. Stocks Foreign Bonds Foreign Stocks 15000 10000 5000 Ja n9 Ju 2 lJa 9 2 n9 Ju 3 lJa 9 3 n9 Ju 4 lJa 9 4 n9 Ju 5 lJa 9 5 n9 Ju 6 lJa 9 6 n9 Ju 7 lJa 9 7 n9 Ju 8 lJa 9 8 n9 Ju 9 lJa 9 9 n0 Ju 0 lJa 0 0 n0 Ju 1 lJa 0 1 n0 Ju 2 lJa 0 2 n0 Ju 3 lJa 0 3 n0 Ju 4 lJa 0 4 n0 Ju 5 lJa 0 5 n06 0 Source: http://www.ustreas.gov/tic/ ba -20 -40 b Ar we ge nt ina M Sa e ud xico iA ra Ma bi a lay s Pa ia Tr na ini ma da da C nd hin To a Ba bag ng o lad es Ug h an Ec da ua do Uk r ra ine Ch ile Ind Tu ia n Ind isia on es Be i a lar Mo us ro Lit cco hu an Cr ia oa t Es i a to n Bu ia lg Bo ar ia tsw a Na na mi bia Zim Many countries have appreciated against the dollar (%) 2002.1～2005.1 100 80 60 40 20 0 -60 -80 -100 Source: World Bank. Global Development Finance 2005 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 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 Variable Model EXPORT Parameter Variable Standard 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 Variable Standard 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 Parameter Variable FDI Standard 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 Parameter Variable RATES Standard 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 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 Variable 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 FRA PFRA 30,000 25,000 Growth rate of CA 5% Growth rate of FI 8% Federal funds rate 1.46 → 2.14 REX 20,000 (from 2005 to 2010) 8.028 → 6.894 15,000 10,000 5,000 -5,000 10 20 09 20 08 20 07 20 06 20 05 20 04 20 03 20 02 20 01 20 00 20 99 19 98 19 97 19 96 19 95 19 94 19 93 19 19 92 0 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 ! 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