Research On International Capital Liquidity Crisis And Bailout

The inflows of international capital contribute to the economic development and macro-economic growth for the capital-receiving country,which is also one of the basis for the deepening of the integration of international financial markets.The short-term international capital flows can significantly affect the liquidity of the banking system and the fluctuation of the asset price.The reversal of international capital flows or sudden stop is likely to threaten the stability of the domestic macro-economic and financial system and even trigger a systemic risk in financial markets.As a result,when is the central bank to bailout,and choose which kind of the rescue tool,with how much quantities are the main goals of this paper.From the view of the stability of the financial system and the prevention of the systemic financial risk,this paper is concerned about the sudden stop of the international capital flows how to affect the liquidity of one country.Historically,the financial crisis is often linked to the fall of asset prices and with the research techniques of expanding the DSGE model,based on the central bank's setting as the lender of last resort with the international capital inflows,capital prices,liquidity rescue tools and macro-prudential policies on the open DSGE model with capital controls around the financial accelerator mechanism and bank runs mechanism.To illustrate the the necessity role and positive effect of rescue tools such as the government's self-rescue(foreign reserves)and international cooperation(bilateral currency swap)in theory,what's more,based on the analysis of expected net output accounting and welfare effect under the bailout mechanism,define the scale of these rescue tools.The main works of this paper are as follows:First,based on RBC model in small open economy,we test whether the model including international capital flows in the form of overseas deposits(loans)can explain the dynamic correlation between foreign reserves,liquidity crisis and crisis bailout in Chapter III.Based on the impact of sudden stop of international capital flows in the open real business cycle(RBC)model on the accumulation of capital stock and current investment of a country,the expectation for insufficient international payment of the central bank of international investors will further exacerbate capital escape and currency depreciation.Numerical exercises explain the scale of international capital inflows,liquidity crises and the pace between foreign reserves consumption and international bailout have a dynamic consistent correlations.Second,For the object of explaining the risk of international capital flows sudden stop and testing the rescue effect of foreign reserves,the financial accelerator mechanism and bank runs are combined into the DSGE model.Based on the closed DSGE model,we introduce international capital flows by foreign deposits in Chapter?.The DSGE model considers the bank-leading financial markets risks and enterprise-leading real economy risks under the sudden stop of international capital,which breaks the limitation in most literature that emphasize the key role of single economic sector.The model considers the "double financing premium" including financing premium in banks and financing premium in enterprises,which discusses the international capital liquidity crisis and bailout path around bank capital.Under the open macroeconomics with capital controls,we construct an open DSGE model to test the risk of sudden stop and the rescue effect of foreign reserves.The numerical simulation results show the following three points,Firstly,as far as the risk of international capital liquidity is concerned,the sudden stop of international capital flows has caused great losses in both the financial market and the real economy,especially in the financial sector.Because banks play the intermediary role of international capital inflows and outflows,they also bear the risks in the process of international capital flows,especially the abnormal or large-scale outflows of international capital.Secondly,Under the bailout of foreign reserves,the impact of bank runs from sudden stop on financial markets and the real economy has been alleviated.Last but not least,we introduce macro-prudential supervision tools,the Counter-cyclical Capital Buffer plays a role in bank department directly,it can adjust the bank's balance sheet by affecting the return on bank assets,and which is helpful to alleviate the negative impact of the sudden stop.However,the Counter-cyclical Capital Buffer can't alleviate fluctuations from technology shock for that has no effect on the fluctuations of the investment and the return on capital,which means distinguish the types of shocks is important before choosing the macro-prudential supervision tools.Third,we proposes a model of liquidity shock in Chapter ? which aims at alleviating the impact of sudden stop through foreign reserves and bilateral currency swap in an open macroeconomics,and explores the effect of foreign reserves and bilateral currency swap on the expected surplus created by international capital,we also show the optimal ratio of foreign reserves and bilateral currency swap lines responding to different liquidity shocks by setting parameters and simulating.If we define the liquidity shocks of international capital as 0 and 1,then the results tell us that,with the increasing of the liquidity shocks,the expected net output will decreases 0.99%.So the liquidity rescue is necessary.Specifically,when the liquidity shock of international capital is less than 0.5,the optimal ratio of foreign reserves to international capital is about 24%,which can handle most of the financial liquidity crisis;when the liquidity shock of international capital is as high as between 0.51 and 0.87,the best relief way is the combination of foreign reserves and bilateral currency swap.Therefore,the corresponding interval of optimal ratio of foreign reserves and bilateral currency swap to international capital is 24.18%?25.55%and 0.33%?35.54%,respectively.Comparing the above outcomes to the bilateral currency swap lines from China and from Federal Reserve,we discover that the scale of foreign reserves and swap lines in arrangements falls into the optimal interval in the model,but the majority countries can not cope with the liquidity shock above 0.6.That is to say,most countries with the inadequate reserves,only Brazil,Denmark,Japan,Republic of Korea,Russia and Thailand had the adequate reserves when signed the swap arrangements,meanwhile,the bilateral currency swap lines in arrangements from China to Kazakhstan,Turkey and Serbia is too low to provide adequate liquidity when met with liquidity crisis.