DP14860 The efficiency of the Chinese silver standard, 1920-33
|Author(s):||Nuno Pedro G. Palma, Liuyan Zhao|
|Publication Date:||June 2020|
|Date Revised:||June 2020|
|Keyword(s):||Chinese Economy, Exchange Rates, market integration, silver point arbitrage|
|Programme Areas:||Economic History|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=14860|
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.