The Causes, Effects And Controlling Measures Of Currency Mismatches In Emerging Markets

For emerging markets during their processes of economy development, it is inevitable to face the problem of currency mismatches caused by differences in the currencies in which their assets and liabilities or/and their income and payout are denominated in a situation of open economy and economic globalization. However, a country with large currency mismatches will suffer their adverse effects on stability of its macroeconomy and financial security, even a currency or financial crisis. Based on existed research, this dissertation has comprehensively and systemically studied the causes, effects and controlling measures of currency mismatches in emerging markets. It has also researched the problem of currency mismatches in China.With the internationally comparative and empirical analysis of the status of currency mismatches in emerging markets, the conclusions can be made that there is high correlativity between currency mismatches with the form of net foreign liability and the outcome of currency crisis and the problem of currency mismatches is the characteristics of universality, inevitability, complexibility, endangerment and regionality. As to the developing trends of currency mismatches in emerging markets, I conclude that the situations are much better than ever in all, but they will be longstanding and possible to exacerbate.Currency mismatches in emerging markets are the outcome of co-action of domestic and foreign facts, which the former includes underdevelopment of domestic bond markets, fixed exchange rate arrangement and the weakness of economic policy and institution, while the latter may be the economic globalization and the weakness of existing international monetary system.In emerging markets, if there are large currency mismatches, no matter which forms they would behave, they would result in adverse effects on stability of emerging markets' macroeconomy and financial security, such as investment contraction and outcome decrease, effectiveness of monetary policy, dilemma in the choice of exchange rate regimes, even a banking or currency crisis, and so on. Therefore, measures must be taken from both domestic and foreign aspects to control the accumulation of currency mismatches for emerging markets. In addition, this dissertation has put forward the conception of tolerance of currency mismatches and discussed the construction of the early warming system of currency mismatches risks.As an emerging market, China has been long facing the problem of currency mismatches too. Currently, the attribute of currency mismatches in China is substantive net foreign assets, which have some advantages at the same time have resulted in seriously passive affects on the stability macroeconomy. Therefore, measures must be taken from both home and foreign aspects for China to control the quick accumulation of currency mismatches in the short time and to settle ultimately the problem in the long time.