Research On International Capital Flow And RMB Exchange Rate Fluctuation

Financial opening is the inevitable direction of China’s economic and financial reform and future development.The deepening and extensive financial opening will not only bring benefits to China’s development,but also magnify the impact of external shocks on China’s financial market.Overall,since reform and opening up,along with our country economy high speed development and the financial openness,a lot of capital into the Chinese market,for China’s development brings the huge capital support from all walks of life at the same time,also brought inflation pressure,negative effects such as stock market bubbles,capital of the double-edged sword properties were highlighted.At present,China is in a critical period of economic growth shift,structural adjustment and transformation and upgrading,and the economy’s ability to resist risks is weak.In addition,China’s RMB exchange rate formation mechanism needs to be further improved,the development level of the financial market is still low,and the domestic market is vulnerable to the impact of external risks in the international market.Therefore,it is of great theoretical value and practical significance to study exchange rate fluctuation and international capital flow in China under the background of financial opening.Firstly,this paper reviews the research achievements and experience of Chinese and foreign scholars in the field as the logical starting point of the research.By sorting out the relevant materials of financial opening,currency exchange rate fluctuation and international capital flow,from the international and domestic levels,respectively,The paper preliminarily explores the deepening path and policy effect of financial opening strategy,the evolution of international capital flow situation,the characteristics of fluctuation trend with RMB exchange rate,influencing factors and economic effect,as well as the transmission and linkage mechanism among the three factors under the premise of different systems and regional systems.By reviewing,sorting and summarizing the previous research results and history,the research methods and technical routes adopted in this paper are further clarified.In this paper,we first review and analyze a priori case with typical characteristics(the process and effect of financial opening in Russia and Brazil),and explain the possible positive or negative effects of financial opening in a heterogeneous and comprehensive context in a realistic sense.Then,taking this as an empirical reference and combining the reality of each period,the detailed course of China’s financial opening-up from the beginning to the present is systematically combed out,as well as the reform course of China’s exchange rate system under the above premise.Then,from the domestic and international perspectives,the paper combs the changes of China’s international capital flow quota,structure and other aspects.Through the description and analysis of relevant information in this chapter,this paper has intuitively identified and judged the logical relationship among China’s financial opening,RMB exchange rate and international capital flow,which provides an empirical basis for the construction of theoretical analysis framework in the following chapters.And then in the theoretical analysis of plate,this paper in reference to the previous analysis method at the same time,according to various characteristics in the development of our country’s economy,including portfolio,uncovered interest parity,purchasing power parity(PPP),Taylor rule and short-term investment utility theory model,based on the actual market infers the sinicization of modification,extension and integration,the influence mechanism among China’s financial opening,RMB exchange rate,international capital flow and other macro variables is analyzed and deduced.In this paper,capital control,risk premium and capital flow factors are included into the no-cover interest rate parity model and Taylor rule model respectively,and the dynamic determination mechanism of RMB exchange rate and the dynamic relationship among related variables are analyzed by simultaneous derivation under the assumption of modified Taylor rule.Then based on the short-term investment utility theory with capital control factors,the asymmetric response of international capital flow to exchange rate and other factors is analyzed theoretically.According to the results of theoretical analysis,in the Taylor rule model with the introduction of international capital flow factors,capital control,inflation gap,exchange rate expectation,output gap,interest rate gap and international capital flow are all latent endogenous factors,and under the conditions of heterogeneous economic environment and different deadlines,It is likely that the interplay between different factors in the intrinsic degree and direction of the extended Taylor rule will change.In addition,with the help of short-term capital utility theory and capital control factor into the theoretical model,this paper analyzes the impact of exchange rate factors on the amount and direction of international capital flows of various project types after considering the conditions of financial opening.In addition to the relevant conclusions,it also provides a theoretical basis for putting forward hypotheses and establishing econometric models in the empirical testing process below.In the first and second part of the empirical study,this paper adopts DCC-GARCH,VAR,MS-VAR model and other econometric methods respectively to systematically study the financial opening process in China.The linkage mechanism between RMB exchange rate fluctuation and China’s short-term international capital flow and long-term international capital flow represented by international direct investment,as well as the transmission effect under different zone system.From the perspective of the empirical research results in this part,it is basically consistent with the conclusions obtained from the analysis and derivation of the theoretical model mentioned above,and the empirical test results using MS-VAR also have a high degree of fit with the development path of China’s economy-related fields within the sample cycle.Then,based on the extended Taylor rule as the theoretical basis,this paper constructs or measures the risk premium factor,internal and external output gap and other variables,and uses the NARDL model to test the short-and long-term and asymmetric effects of financial items and their subcategories of capital flows on RMB exchange rate fluctuations are studied with that.Further,the paper uses GARCH-MIDAS model to split the fluctuations of RMB exchange rate into short-term fluctuations and long-term fluctuations based on the level of financial openness and many macro factors.After that,drawing on the methods of Zhang Chunbao(2016)and other scholars,the De Facto indicator is established to make an overall and classified measurement of the degree of financial openness in China.According to the empirical results,the direction of the impact of financial openness on the overall RMB exchange rate as well as the long-term and short-term fluctuations is basically the same,and the expected fluctuations of the exchange rate are in the same direction as the fluctuations of the exchange rate level.On the basis of using the above research results,once again choose NARDL model is open to the financial background,the short and long part of the RMB exchange rate fluctuations,exchange rate and other factors on the international capital flow in our country,in the short-and-long-term study respectively,and the asymmetric effects to test under the background of different periods and categories of open,the RMB exchange rate factor effect on capital flows.From the empirical research results.In general,exchange rate factors do have asymmetric influence on capital flows under different projects in China,which is consistent with the hypothesis of the theoretical analysis above.Finally,this paper based on the case analysis,theoretical research and empirical test of the combination of the results of the study.After the summary conclusion to the research content,in the process of open to our country in the future continue to push forward financial exchange rate system reform and the risk control,as well as build cross-border capital flows macroprudential management framework of policy ideas put forward related Suggestions.