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Analysis Of Financial Crisis In Financial Openness Settings In The New Market And Developing Countries

Posted on:2008-04-20Degree:MasterType:Thesis
Country:ChinaCandidate:P X HuangFull Text:PDF
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In a framework which stresses the classic theory of comparative advantage, finance opennesshas a potential of adding great value to the social welfare. Nevertheless, after choosing a highdegree of financial openness, many counties have enjoyed the potential welfare increment in thepotential classic framework. Moreover, they have been dragged into the financial crisis whichhas brought a huge amount of economic loss and social crisis to the other counties.Due to the lack of external extension based on internal deepening foundation of domesticeconomical financial development demand in developed or transit countries, financial opennessstays as a passive result of various external pressures in the external paradox process. And fromthe very beginning, the passive financial openness carries the strength of financial crisis. Theasymmetry between the share of interests and risks of financial openness exits in the structure ofpassive financial openness. Those developed countries which participated in financial opening ofdeveloping counties, especially U.S, use a minor or close to zero loss risk to share the openingfinancial market profit of developing countries. Countries which are opening their financialmarkets have to take full risk to gain profit. Moreover, they are influenced by the developedcountries due to paradox disadvantaged position. This is an economical explanation of financialcrisis that lead to heavy losses in the recently 30 years almost all happened in counties with newmarket or developing countries. Meanwhile, the vulnerable of countries with new market and theredundancy of global currency liquidity overflow are also the direct reasons for the abovephenomenon. It's also a result of global currency system imbalance which is due to theirresponsible behavior of over issuing international currency—U.S dollar. In another word, U.S.has exported financial crises to countries with new market globally.The financial opening risk in China has increased along with the degree of its openness. Crisisis pregnant in the process of increasing its openness. Furthermore, the huge scale of foreigncurrency reserve in China may become a notch of its financial crisis due to its project structuralproblems. And the withdrawal of the dangerous international short term capital after making aprofit can also become a fuse lighter in China's financial crisis. Focusing on the financial crisislogic with an opening finance background, and incorporating the financial openness structure inChina, it has to adopt related measures to prevent the financial crisis in its opening process.
Keywords/Search Tags:external financial openness, financial crisis, interaational short term capital, financial regulation
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