The Efficiency of the Chinese Silver Standard, 1920–1933

Palma, Nuno; Zhao, Liuyan

http://hdl.handle.net/10451/49518

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Authors

Palma, Nuno

Zhao, Liuyan

Abstract(s)

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.