The Research Of Emerging Marker Currency Crisis Based On The Perspective Of Currency Mismatch

Currency mismatch is a worldwide common problem in the process of economic globalization and financial globalization today. Massive currency mismatch may affect the financial system of a country in its stability, the effectiveness of monetary policy and the flexibility of the exchange rate policy. At the same time it may also cause huge adverse impact on output, etc. Since1990s, currency crisis broke out in the emerging markets represented by Europe, Latin America, Southeast Asia which resulted in a serious impact on the world’s financial markets. Currency mismatch was serious in the whole process of the financial crisis in all these countries. Based on the characteristics of currency mismatch in the emerging market, this article will look at the currency crisis in the emerging market from the currency mismatch perspective.Firstly, this article analyzed the theories of the currency crisis and currency mismatch, proposed an innovative view on currency crisis from the currency mismatch perspective. And under this perspective, the article analyzed the current status of emerging market currency mismatch which demonstrated the close correlation between currency mismatch and currency crisis. Before, during and after the currency crisis, the severity of currency mismatch in all these emerging markets went through three stages:the massive accumulation, rapid deterioration and correction.Globalization and the current international monetary system is the main reason for the emerging market currency mismatch by mismatch from both internal and external aspects of the emerging market currencies influencing factors are analyzed. Own development of the emerging markets are not mature enough financial markets, the policy regime imperfect exchange rate system rigid and unreasonable domestic policy measures is also important reasons to exacerbate the degree of currency mismatch.Through the analysis on the factors that caused the currency mismatch, internally and externally, it was found that the globalization and current international monetary system are the main reasons for currency mismatch in the emerging markets. The characteristics of an emerging market, such as immature financial markets, the limitations of political system, the rigid currency exchange policy and unreasonable domestic policy measures would only make the currency mismatch even worse. This article analyzed the mechanism of action of currency mismatch on currency crisis from the following aspects:monetary policy, macro-and micro-economy. The conclusions from the analysis of the monetary policy show that currency mismatch reduces the effectiveness of monetary policy on the intermediate target and spreading path. The analysis on the macro-and micro-economy indicates that the massive accumulation of currency mismatch on either credit or debt will have negative impact on the economy. When the exchange rate fluctuates widely, currency mismatches can reduce the scale of investment in economic subjects which will decrease the output. The scale of currency mismatch is determined by international balance of payments, if there is large-scale currency mismatch in an emerging market, the international capital liquidity risk will increase which can result in a crisis in international capital flow, affecting the stability of international balance of payments and eventually triggering a currency crisis. Massive currency mismatch will increase the vulnerability of a financial system, cause the macro-and micro-economic fundamentals to deteriorate and result in currency crisis if there are external forces.For the emerging markets in Asia and the Americas that have experienced currency crisis, this article utilized the short-term currency mismatch index model to verify the mechanism of the currency mismatch on the currency crisis. The model empirical analysis shows that the short term currency mismatch index normally lags one year behind the adverse impact on economy, the impact is more obvious in the next year than the current year. It also shows the impact on the economy from short-term fluctuations to the long term balance is relatively small. This means that the currency mismatch is an important factor in financial crisis, it may exacerbate the extent of the damage by the financial crisis. The sharp increase of currency mismatch will have a negative impact on economic growth. This result supports our theoretical analysis, which can be considered the conclusions of the theoretical analysis gets validated in practice.At the end of this article, based on the conclusions of this study, policy recommendations are provided targeting the current currency mismatch problem in China.