Estimates The Scale Of Hot Money In China And An Empirical Analysis Of The Influencing Factors

In today’s world，economic globalization and financial liberalization tends to beobvious, and massive movements of short-term capital has become the norm. Andwith the development of securities markets and financial derivatives market in theworld, also with increasingly large flows of hot money, as a consequence, short-termhot money in the international capital has become an important force in the worldcapital markets, which have a tremendous impact on not only for the country’seconomic development, foreign trade and financial policies, but on the State stabilityin the market and the financial order. From our country’s development, in practiceChina’s capital controls is weakening, and visible and invisible barriers hot moneyflows are gradually clearing, hot money has flowed into china because of themotivates of arbitrage, arbitrage, which has a great effect on the development ofChina’s macroeconomic policy and asset price bubble. Study on the scale of hotmoney and motivation is quite necessary.General idea of this research is based on the concept of hot money, motivationtheory research to further explore the improvements on the existing measurementmethods of hot money, using the appropriate method to measure the size of hot money.Then analyses the three motivator-interest arbitrage, exchange arbitrage and cross rateof hot money flowing. And it conducts empirical tests on them.Specific methods for measuring hot money is based on the direct method and theindirect method, has explored the hidden channels of the flow of hot money, andsuggested this measure the specific formula of hot money;This research builds a triple arbitrage model based on the current situation andfeatures of hot money flowing in China. At the same time, it uses several methods,such as the VAR model, IRF and Granger causality test, to analyses the threemotivator-interest arbitrage, exchange arbitrage and cross rate of hot money flowing.The conclusion show that:(1) Expectation of RMB appreciation is the Granger causeof hot money flowing and causes the flowing of hot money greatly. Moreover, hotmoney flowing becomes the Granger cause of expectation of RMB appreciation whenthe lag length increases to8or higher.(2) There is no Granger causality relationshipbetween China and American rate difference. China and American rate difference isn’tthe Granger cause of hot money flowing. Meanwhile, hot money flowing has littleeffect on the change of China and American rate difference.(3) Hot money flowing and changing of assets price have no Granger causality relationship with each other,except one condition. When lag length comes to3, hot money flowing becomes theGranger cause of the changing of assets price.