The Influence Of Capital Account Liberalization On Currency Crisis

The research of currency crisis contagion mechanism is one of the important international issues in International Finance. People began to realize the seriousness of the currency contagion since the1990s, when many currency crises concentrated outbreak in a row. The occurrences of a highly contagious performance make domestic and foreign scholars increasingly concerning about the relationship between capital account liberalization and currency crises. At the same time, because of capital account liberalization in various countries and regions accelerating the process in this period, the issues of the relationship between capital account liberalization and currency contagion cause our attention.Based on literature review, this thesis selects a series of representative countries for study of the currency contagion mechanism. The analysis showed the existence of the correlation between capital account liberalization and crisis contagion. And then, combined with the main factors of macroeconomic fundamentals, this thesis verifies the channels and means in which capital account liberalization impact on currency crises contagious.As China’s international status and degree of integration into the world economy improved, China has its own special and actual specific conditions. How to conform to the global trend of capital account liberalization, and safeguard our country’s economic security is very crucial for China. At the same time, exploring the role of capital account liberalization in the currency crisis and its contagion in-depth, setting down appropriate capital account liberalization policy to prevent the occurrence of currency crisis and contagion effectively is particularly important for present China. Under the background of world economic development, this thesis will combine an open capital account and currency crises contagious to carry out the research. Through the theoretical and empirical analysis, the progress of China’s capital account liberalization can learn some experiences and lessons from other countries.The subject of this thesis includes four parts. The first part is the theoretical basis of the full text. It reviews and summarizes the theoretical and empirical methods in the field, and determines the proposed concept definition and measurement standards. The second part is the contagion on the basis of the original theoretical model. It set up a currency crises model with a microcosmic basis and a financial contagion model with multiple equilibria, by introducing the capital account liberalization variable quantitatively into the models. On this basis, after testing the theoretical model by using the data of the Southeast Asian crisis, the existence of currency crisis contagion has been evidenced. The third part is the concrete analysis of the medium of the influence on currency crisis contagion. Through grouped-data test for the developed countries and developing countries, we find the economic fundamentals play a role in the process of impact. The fourth part is a combination of the theoretical and empirical analysis framework, and to explore the relationship between China’s capital account liberalization process and foreign exchange pressure index. And in accordance with results, corresponding policy recommendations have been brought forward to guard against the occurrence of currency crisis in China, providing a new way of warning for the prevention of currency crisis.