The Empirical Analysis Of Currency Mismatches On World’s Major Economies

Currency mismatch is defined as followed: when the national or regionaleconomies engage in activities including international trade, economic cooperationand capital transactions, assets and liabilities denominated in foreign currencies aresensitive to exchange rate fluctuations, which appeared on the value of the asset-liability mismatch. We call this phenonmena Currency Mismatch. Foreign scholarsabout the phenomenon of currency mismatch began in Latin America and the Asianfinancial crisis, researchers found that a large number of countries hold hands crisesliabilities denominated in foreign currencies, the currency was devalued after severeattacks of international capital, and the country’s business capital formation includes alot of foreign debt. Currency devaluation will produce net losses to a large extent,with the collective failure of the national monetary and exchange rate policies,financial security has been badly damaged. Since the beginning of new century, thesituation of foreign exchange reserves makes economies turn into credit currencymismatch. You can see from the experience of the crisis,currency mismatch is ahidden risk, the net loss in the same time, resulting in a conflict of macroeconomicpolicies, macroeconomic stability and financial security. Currently, the lingeringglobal economic situation, the financial environment is not optimistic that China holdshuge foreign exchange reserves, a large net foreign currency assets bears a veryserious currency mismatch risk, and can effectively solve the problem of currencymismatches related to China’s financial continued security and economicdevelopment.In the past, domestic scholars focus mostly on the degree of currency mismatch,neglecting the perspective from economies from international comparativeperspective and the perspective of financial and currency mismatch factor. In thispaper, We select some big country economies for the study, combined with economicstrength and currency mismatch condition economy, targeted South Korea, Japan,China, Brazil, Russia, India as a research sample. Beginning from three financialfactors: foreign exchange reserves, exchange rate, exchange rate regime, We useempirical research method and currency mismatches financial factor model to studythe intrinsic relationship. According to the test results, We put forward correspondingcountermeasures. The specific content of the article and structure includes the following sections:(1)Firstly, We organize and introduce some existing research works about thedeparture of currency mismatch. Secondly, We introduces the basic theory ofcurrency mismatch, from conceptual analysis, model selection measure persepectives.We decide to use the measurement index AECM model. The last part focuses onfinancial security perspective of currency mismatch equipped to analyze the internaland external dimensions to two factors.(2)Analysis about major economies’ currency mismatch situation. Combined withnational, regional distribution and characteristics of economic development, theeconomic background of this currency mismatches in six countries around thephenomenon of cut angle, respectively, we try our best to do cause analysis andmeasure the degree of currency mismatch. Currency mismatch analysis of SouthKorean focused on the causes of excessive borrowing and debt structure analysis, theJapanese currency mismatch focused on domestic policy failures, changes in thefinancial sector and the private sector, the impact of foreign exchange assets of thetwo dimensions, while the degree of currency mismatch analysis focus on financialsecurity factor analysis and comparison with Japanese.BRIC countries, taking thecombination of high inflation into consideration, Brazil and Russia, the currencymismatch analysis focused on two directions of policy formulation and debt structure,the Indian currency mismatch analysis focused on the safety net foreign currencyassets. We estimate of the AECM index of six major economies, analyzes the extentof the major economies in different periods of currency mismatch and thecorresponding reasons.(3) Empirical test of the intrinsic relationship of six major economies degree ofcurrency mismatch reserves, exchange rates, exchange rate regime between empiricalresearches. Innovative use of state-space model SSM model analyzes the impactmechanism. The empirical results show that: the degree of currency mismatch, allmajor economies most affected by the impact of exchange rate movements, changesin exchange rates for currency mismatch is long-term. As for the exchange rate regime,the analysis carried out by the exchange rate reform in several countries state spacecan be seen, Closer to the floating exchange rate regime and liberalization of direction,the more effectively will economies weaken the degree of currency mismatch. Forforeign exchange reserves, reserves for debt can see currency mismatch nationalcurrency mismatches have a very large extent, by the elastic state space analysis, the net foreign exchange reserves and currency mismatches there is a strong relationshipbetween flexibility, reflecting foreign exchange reserves allotment impact on currencymismatch is more significant.From the perspective of financial security, currency mismatch will affecteconomic development, increase accumulation of financial risks and endanger thestability of the financial system. From the aspect of financial reform, we should makesome effort from the domestic financial reform and the two dimensions of theinternational monetary system reform, from the exchange rate regime, the foreignexchange market, foreign exchange reserves management perspective to be improvedand optimized, and actively promote the process of internationalization of the RMB,an increase of voice and participation in the monetary system.