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Title: The efficiency of the Chinese silver standard, 1920-33

Author(s): Nuno Pedro G. Palma and Liuyan Zhao

Publication Date: June 2020

Keyword(s): Chinese Economy, Exchange Rates, market integration and silver point arbitrage

Programme Area(s): Economic History

Abstract: We test for domestic money market integration in China during 1920-1933 using a new dataset of daily domestic exchange rates. Our data concerns tael-denominated telegraphic transfers between Shanghai and three other major cities: Tianjin, Hankou and Beijing. We show that domestic markets, as measured by the efficiency of the Chinese silver standard, were highly integrated. Silver arbitrage was effective, and silver-point violations were rare. Our findings challenge claims of market fragmentation due to weak state capacity, and contribute to a revaluation of market development during China's Republican period.

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Bibliographic Reference

Palma, N and Zhao, L. 2020. 'The efficiency of the Chinese silver standard, 1920-33'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14860