Capital Account Liberalization, Capital Outflows And Currency Crisis

As the United States raise interest rates gradually, the move will make U.S. dollar financial assets more attractive, and make capital in emerging market economies return to the United States gradually, thus some emerging economies may face challenges such as capital outflows sharply, currency depreciation. Furthermore, the Federal Reserve to raise interest rates will lead to China’s capital outflows, drop in foreign exchange reserves and the pressure of RMB devaluation. Coupled with the current China accelerating the pace of capital account liberalization gradually, the capital outflows and the pressure of RMB devaluation will further increase in the near future. So study the dynamic relationship of capital account opening, capital outflow and currency crisis, which provide the corresponding policy guidance of capital outflows and RMB devaluation after China open capital account.First, the paper studies the situation, causes and channels of global capital outflows. Second, from the two perspectives of the capital flows and Masson model of join capital account opening, which make theory analysis of capital account opening, capital outflow and currency crisis. Once more, utilizing means of differential GMM and system GMM to dynamic regression estimation includes overall and Asian countries, Latin America and European countries. The empirical results show that: Capital account liberalization has positive effects on currency crisis, the country’s capital account openness will increase the possibility of currency crisis in the country. And the early capital outflows have negative effect on currency crisis, but with the increase of capital outflows scale will improve the probability of country’s currency crisis. Finally, the analysis relationship of China’s capital account capital opening, capital outflows and RMB devaluation.According to the empirical results and the current economic situation in China, Think of the current China should take the following three aspects emphatically. First, carry out the mode of open capital account progressively. Second, moderately control the scale of capital flight and number. Third, Prevent the generation of a currency crisis.