RE-MEASUREMENT OF SHORT-TERM INTERNATIONAL CAPITAL FLOWS AND ITS APPLICATION: EVIDENCE FROM CHINA

In this paper, we use the improved direct method and improved residual method to re-measure the annual scale and to measure the quarterly scale of the short-term international capital flows based on the Chinese Balance of Payment table. At the same time, we use the residual method to estimate the monthly scale of the Chinese short-term international capital flows as well. Then we explain and test these calculated results. Next we apply the results to the lead-lag analysis of macro-economy. To judge whether the short-term international capital flow is a leading indicator, we apply the Kullback-Leibler information method and cross-correlation analysis method to analyze the lead-lag relationship between the short-term international capital flows and macro-economy by selecting some representative macroeconomic indicators as a reference. Our empirical analysis shows that in China, the short-term international capital flow is a leading indicator to macro-economy and a coincident indicator to Purchasing Managers' Index. In the end, we give some conclusions and policy proposals.