Working Paper: CEPR ID: DP14860
Authors: Nuno Palma; Liuyan Zhao
Abstract: We test for integration of financial markets in China during 1920-1933 using a new dataset of domestic exchange rates. Our data concerns tael-denominated telegraphic transfers between Shanghai and nine other cities. We find that Chinese financial markets, as measured by the efficiency of silver-point arbitrage, were highly integrated among major commercial hubs in north and central China, but there was a lower level of integration for more remote cities in the south. Our paper presents the first comprehensive assessment of the efficiency of the Chinese silver standard, and contributes to a revaluation of market performance during pre-communist China
Keywords: silver point arbitrage; market integration; exchange rates; Chinese economy
JEL Codes: N15; N25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| geographical and political factors (F55) | market performance (G14) |
| efficiency of the silver standard (E42) | facilitation of transactions (L14) |
| integration of financial markets (F30) | efficiency of silver point arbitrage (G19) |
| efficiency of silver point arbitrage (G19) | market integration (F02) |
| estimated silver points (Y10) | market integration (F02) |