China's Capital Flows Suddenly Stop The Empirical Analysis Of The Impact Of The Rmb Exchange Rate Movements

Capital flow is an important form of international economy communication, with the development of economic globalization, capital flow on one hand, helps the country's economy development speed up and better, on the other hand, it becomes more and more frequently and drastic.Since the 1998 Asian financial crisis, the defect of capital flowing frequently comes out of the water, especially in the form of capital flow sudden stop. Capital flow sudden stop mainly displays in capital inflows reduce and capital outflow increase. Due to the research of this area has been on the upgrade, especially after the Asian financial crisis, the research of Thailand, Malaysia's capital flows increases gradually, scholars of this research field have with a keen interest of this area. However, because of the late starting, and each scholar has his own point on the study, so, for capital flows sudden stop, there is no unified definition. In this paper, in order to explain sudden stop clearly, I define sudden stop with a quantity standard. This paper argues that, when a country capital outflows increased rapidly, and capital inflows also decreasing, this country has suffered capital flows sudden stop.At the same time, the exchange rate is getting more and more attention by the other countries. The main mode of exchange rate is divided into fixed exchange rate and the floating exchange rate. Before 2005, the United States and other capitalist countries basically execute the floating exchange rate, and China executes the fixed exchange rate system, in view of the problem of RMB exchange rate model in the world has been mentioned several times. After the reform of exchange rate in 2005, China begins to execute a managed floating exchange rate system, slowly close to the floating rate system. In this background, China's exchange rate appreciation or not has been a highlight of the international community. Since 2005, the RMB exchange rate becomes a general trend of rise.Sudden stop is always related to a country's exchange rate. When a country's exchange rate rises, it will attract the foreign countries' capital, and it leads to the increase of capital inflow. When a country's exchange rate drops, it leads to the reduction of the capital flow. The range of the change in exchange rate directly influence if it will happen capital flows sudden stop. Through analysis the causes and effects of capital flows and exchange rate changes sudden stop, combined with the situation of our country in recent years, through modeling analysis the 1978 to 2009 in China capital flows sudden stop and the relationship between the exchange rate for China's national conditions, analysis of capital flows sudden stop and the reasons of the fluctuation of exchange rate, and points out that it is right to execute a managed floating exchange rate system because it is suit to China's national conditions. And gives the government suggestions on fiscal, monetary and exchange rate policy to reduce and slow down the affection of sudden stop.