Capital Account Opening, Capital Flows And Financial Risks

The effect of capital account liberalization on economic growth and financial risk has always been concerned.Due to the opening of the capital account,the relative lack of capital can get cross-border capital inflows,and then make up for the shortage of domestic capital,thereby increasing the power of economic growth.But the repeated occurrence of the financial crisis are warning the capital account of the effect of economic growth theory is not portrayed as the perfect reality shows that with the expansion of capital account openness,usually did not bring economic growth,but the financial risk and financial crisis.Therefore,not only does the Lucas paradox cause concern again,that is why the capital flow is not from the capital rich countries to the capital poor countries,but the capital flows from the capital poor countries to the rich countries.Moreover,under the opening of capital account,financial risk has become an important concern.As we all know,the opening of the capital account means for the deregulation of cross-border capital flows,so that it can flow freely without restriction,therefore,the opening of the capital account and the free flow of capital is closely linked to the inevitable.The research on the impact of capital account liberalization on capital flows is very rich,and the research perspective is diverse.From the perspective of financial risk analysis of the capital account opening effect of the same results.By combing the capital account liberalization,capital flows and financial risks,we find that there is little capital flow as the transmission mechanism,and analyze the relationship between capital account liberalization and financial risk.Therefore,the purpose of this paper is to establish a unified analysis framework of capital account opening,capital flows and financial risks of the three,according to IMF released "exchange restrictions and exchange rate arrangements" report and balance of payments for the classification of the capital account,from direct investment securities investment outflow and inflow,outflow and inflow,outflow and inflow of other investment angle effect analysis of capital account for all kinds of different capital flows.Through the analysis of the influence of capital account liberalization on capital flow,the financial risk is analyzed.It should be noted that,on the financial risks,the academic community has been relatively mature and complete definition and analysis framework.But different from the above analysis,this paper from the perspective of the flow of capital to the capital account liberalization impact on financial risk,through the review of the previous financial crisis,the essence of capital account liberalization of the financial crisis to the banking crisis and currency crisis.Because of the crisis as the risk of concentrated outbreak stage,and the period of crisis,in view of the fact that there are still a number of countries not experiencing a crisis,to make research findings more general,the use of bank risk and the risk of currency crisis theory and empirical analysis.Therefore,the purpose of this paper is mainly for the following two aspects: first,how to open the capital account.Specifically,the capital account liberalization is the direct investment inflow and outflow of factors,if it is,capital account liberalization is to promote direct investment inflows or promote the direct investment outflow.It also provides some theoretical explanation for Lucas' s paradox.Two,from the perspective of capital flow,the relationship between financial risk.Because the financial risk is divided into the risk of currency crisis and the risk of the bank,therefore,the analysis of the direction of direct investment flows in turn affects the risk of currency crisis and bank risk,and other capital items are similar.In this paper,firstly,by the method of descriptive statistics,we analyze the capital flow under the opening of capital account.The results show that different types of capital sub items are different in the direction of capital account liberalization,which provides the basis for the following empirical analysis.Next,this paper constructs a panel data model from the perspective of the Global Multi Country,and uses the feasible generalized least squares(FGLS)method to analyze the impact of capital account liberalization on capital flows.Taking into account the inherent problems of the model itself,the robustness test is carried out on the basis of the model,and the method is generalized moment estimation(System-GMM).In the direction of capital flow and financial risk,the same as to avoid the endogeneity of the empirical analysis of the results of deviation,using GMM to analyze the impact of various types of capital flows on the risk of currency crisis and bank risk.In our country as a separate object of analysis,research methods for time series analysis method,namely how to analyze China's capital account opening of capital flows from the cointegration analysis,error correction model and the angle of capital flows on monetary crisis and bank risk impact.The main conclusions are as follows:(1)from direct investment flows to the outflow of indicators,for example,the opening of capital account has a significant effect on the impact,and is positive to the inflow direction;for example,the opening of the capital account and the effects of the same as the significant positive correlation between the size of the coefficient found that capital account can affect direct investment outflows greater than effect of direct investment inflows,therefore,capital account openness enhanced the net outflow of direct investment.Second,from the point of view of securities investment flows,the outflow of capital,for example,has a significant impact on the capital account liberalization,and the coefficient is negative.Therefore,the combination of outflow and inflow coefficient is positive and negative,capital account liberalization is positively related to the inflow of securities investment.Third,the flow of investment from other indicators,to flow as an example,the opening of capital account has no significant impact to the inflow;for example,the opening of capital account has significant positive impact on other investment inflows,namely capital account openness enhanced the net inflow of other investment.It is necessary to point out that the opening of the capital account of derivatives investment and total investment flows(inflows and outflows)had no significant effect,that increase has no significant effect on the flow of investment and total derivatives investment flows to capital account openness.The control variables in the regression results show that the part of the empirical analysis,the capital flows into the total capital flows,direct investment flows,securities investment flows,derivatives investment flows and other investment flows into five categories,which are constructed through the analysis of the model,therefore,the size of control variables and significant coefficient,is not completely consistent.The impact of exchange rate and interest rate of total capital flows;the level of economic growth,inflation,the real exchange rate as well as the national system affecting the quality of direct investment flows;the exchange rate,interest rate,institutional quality and the degree of financial development affect securities investment flows;inflation,exchange rate,interest rate and system affect the quality of exchange rate and interest rate derivatives investment flows;and the level of financial development affect other investment flows.(2)capital flows significantly affect the risk of currency crisis.Specifically,direct investment outflows,portfolio inflows are exacerbated by the currency crisis risk,by comparing their influence degree,influence degree of direct investment outflow risk of a currency crisis is higher than the impact of securities investment inflows.It should be noted that other investment flows have no significant impact on the risk of currency crisis.Capital flows have a significant impact on bank soundness.Specifically,the outflow of direct investment,securities investment inflows have increased the risk of banks.Through the comparison of the influence coefficient,we find that the impact of the securities investment inflow on the bank risk is higher than that of the direct investment outflow.And other investment flows have a significant impact on the risk of currency crisis,other investment flows have no significant impact on bank risk.In view of the significant results of the control variables of the monetary crisis risk and the bank risk model,maintaining a relatively high level of economic growth has a positive effect on reducing the risk of currency crisis and bank risk.In addition,to improve the degree of openness of domestic trade is also conducive to reducing the risk of currency crisis.It is worth noting that the risk of currency crisis is closely related to the level of interest rates in the United States,so a country needs to focus on the U.S.interest rate movements and its impact on the risk of domestic currency crisis.(3)the empirical evidence from China shows that capital account liberalization has a significant impact on capital flows,and capital flow is significantly related to financial risk.On the direction of China's foreign direct investment.Cointegration analysis results show that the net inflow of foreign direct investment in China,the degree of capital account liberalization in China,Sino US nominal interest rate of China's economic growth,China's financial deepening degree between these 5 variables there is a cointegration relationship,which shows that the above 5 variables with an equilibrium relationship exists between the Granger causality;the test results show that,at the 5% significant level,China's capital account liberalization is the Grainger reason of net inflow of China's direct investment and Sino US spreads in the name of the significant level of 10% is the Grainger reason of net inflow of China's direct investment in China;the net inflow of direct investment and China's economic growth and financial deepening in the level of significance was 1% each other Grainger causal relation;variance decomposition results show that the impact of capital account openness of China's foreign direct investment in China accounted for a net inflow Relatively large.A case study of China's securities investment.Cointegration analysis results show that the net inflow of China securities investment,capital account liberalization in China,Sino US nominal interest rate of China's economic growth,China's financial deepening degree between these 5 variables there is a cointegration relationship,which shows that the above 5 variables with a balanced relationship between each other;Granger causality the test results show that,at the 5% significant level,China's securities investment net inflows of economic growth in China and the domestic financial deepening degree and reasons of Grainger,this paper focuses on the domestic capital account openness cannot at the 10% significance level through the test,this indicates that China's import of cross-border capital into the domestic stock market still maintain a certain degree of control;variance analysis results show that the impact of China's capital account liberalization of investment securities investment in China is less than the net inflow of China's foreign direct Effect of net investment inflow.A case study of trade credit flow in china.Cointegration analysis results show that the net inflow of trade credit in China,the degree of capital account liberalization in China,Sino US nominal interest rate of China's economic growth,China's financial deepening degree between these 5 variables there is a cointegration relationship,which shows that the above 5 variables with a balanced relationship between each other;Granger causality the test results show that,at the 5% significant level,China's capital account liberalization is the Grainger reason of the net inflow of trade credit of China,trade credit of China net inflows respectively with China's economic growth and financial deepening in the significant level of 5% on the Grainger mutual causal relationship;forecast variance analysis showed that compared in foreign direct investment flows,securities investment flows and financial credit flows,the influence degree of China's capital account liberalization of domestic trade credit the highest net inflows.A case study of China's financial credit flows.Although the cointegration analysis results show that the net inflow of financial credit in China,the opening of the capital account in China,Sino US nominal interest rate of China's economic growth,China's financial deepening degree between these 5 variables there is a cointegration relationship,but the variables are not significant in the level of 10% by the Grainger causal relation test,which shows that the market opening degree of financial credit in China is relatively low,on the other hand shows that financial credit liquidity in China by domestic capital account openness is not significantly affected.(4)capital flows significantly affect China's financial risk.First,the net outflow of direct investment and capital account liberalization and the net outflow of direct investment have increased the risk of currency crisis.In addition,the net outflow of direct investment has no significant effect on the risk of currency crisis without the interaction term.It shows that the risk of currency crisis is reasonable under the capital account liberalization.Second,the securities investment net inflows of capital account openness and interaction as well as securities investment inflows increase the risk of currency crisis.In addition,in the absence of interactive items,the net inflow of securities investment is still a significant impact on the risk of currency crisis,the RMB appreciation pressure.Therefore,need to pay attention to the securities investment net inflows increase to our country's currency crisis.Third,the net outflow of direct investment and capital account liberalization and net outflow of direct investment have increased the risk of China's banks.In addition,the effect of capital account liberalization on bank risk is significantly negative in the case of interactive items.This is not consistent with the majority of scholars believe that the bank will not change the risk of direct investment flows and changes in the direction of change.It can be seen that the flow of direct investment has become an important factor in the bank risk.Fourth,the net inflow of investment securities have a significant impact on China's banking risk.Whether or not the interaction equation including the interaction term contains the regression equation,the conclusion showed that securities investment inflows will aggravate the banking risk in China.In summary,the core ideas and conclusions as follows: the effects of capital account liberalization of capital flows in different sub items,both empirical evidence multinational panel data model or from China,are consistently show that capital account liberalization will lead to a net outflow of direct investment,the net inflow of securities investment.In addition,the consideration from a currency crisis risk and bank risk perspective,a net outflow of direct investment and securities investment inflows increase the bank risk and currency crisis risk,and capital flows from the perspective of capital account under the financial risk is more reasonable.Compared with the existing research,the innovation of this paper is mainly reflected in the following aspects:Firstly,from the perspective of historical evolution,the paper analyzes the similarities and differences of capital account liberalization on the capital flow of developed economies and emerging market economies.In the past,the study on the problem of international capital flows generally focuses on the factors affecting the capital flow,and lacks the horizontal comparison of the impact of capital account liberalization on the capital flow of developed economies and emerging market economies.In fact,due to the development of capital account liberalization in developed countries,the capital flow problem is closely related to the risk of capital account liberalization.Therefore,this paper analyzes the similarities and differences between the impact of capital account liberalization in developed economies and emerging market capital flows showed that in the condition of capital account liberalization,different capital items in different categories of economy shows a flow direction.Secondly,on the impact of capital account liberalization on financial risk and the transmission mechanism,there is little capital flow analysis perspective,and from the global perspective of the more rare.In this paper,from the perspective of different countries,this paper empirically analyzes the influence of capital account liberalization on capital flow.Specifically,how capital account liberalization affects the direction of direct investment,the flow of securities investment,other investment flows and the direction of financial derivatives investment.In addition,on the basis of the global analysis,this paper makes a detailed analysis and demonstration of China's capital flow.On this basis,combined with the specific capital flows,respectively,the bank risk and currency crisis risk analysis.This makes the capital account liberalization,capital flow and risk to become an organic whole,the risk of combing the capital account opening will be more detailed and accurate.