YSI-EHES Economic History Graduate Webinar: Zhihao Xu

Zhihao Xu, doctoral candidate from the University of California, Los Angeles will present his paper: “Price Convergence Through a Financial Network: Does Financial Integration Impact Price Integration in Real Sectors?”

Live on Zoom on June 17, 2021
09:00 Paris | 08:00 London
15:00 Hong Kong/Beijing/Singapore
00:00 Los Angeles | 16:00 Tokyo | 17:00 Sydney
Registration form to attend the webinar: here.

Chair: Professor Debin Ma (Institute of Economic Research, Hitotsubashi University), Co-Director of the International Society for Quantitative History

Abstract
How does financial integration impact price integration in real sectors? Using newly hand-collected data from a domestic exchange market during the Chinese Civil War (1945-1949), I model the connection between these two integrations measured respectively by capital flow costs (or domestic exchange rates) and commodity relative prices across cities. I use battle shocks to a financial hub in the exchange network to identify the impact of exchange rates on price convergence between a city pair connected to the hub. I find that (1) city pairs with a direct domestic exchange link exhibited faster commodity price convergence than others; (2) battles around financial hubs tended to raise capital flow costs between a connected city pair, decelerating price convergence by 4% – 8%; (3) a weak form of purchasing power parity holds: a 1% depreciation in the domestic exchange rates was associated with a 0.2%-0.3% reduction in inflation rate differentials; and (4) a higher inflation rate did not impede or strengthen the price convergence channel via domestic exchanges. These results imply that China’s financial development was more sophisticated than expected relative to its status as an agricultural economy in the early 20th century.

We are very happy to collaborate for this session with the Quantitative History Webinar Series conveners.

The Quantitative History Webinar Series, convened by Professor Zhiwu Chen and Dr. Chicheng Ma of The University of Hong Kong (HKU), aims to provide researchers, teachers and students with an online intellectual platform to keep up to date with the latest research in the field, promoting the dissemination of research findings and interdisciplinary use of quantitative methods in historical research. The Series is co-organized by the International Society for Quantitative History, HKU Business School, and the Asia Global Institute (AGI).