Study On The Measurement And Influencing Factors Of Currency Mismatch In China

Since the1990s, financial crisis of the world broke out frequently. And by study of the crisis, the well-known scholars of both domestic and foreign found one of the main reasons that cause the financial crisis of countries around the world was currency mismatch. Qwing to prevent the crisis happening again, the world should pay attention to the currency mismatch.Currency mismatch is widespread in the emerging market countries. All the emerging market countries have a common factor, that currency mismatch was the type of debtor during the initial period, which means foreign currency assets less than foreign currency debts. Those countries after taken measures to increase foreign currency assets that surpassed the foreign currency debt, even more than foreign currency debt, but extra large foreign currency assets were hard to hedge, so currency mismatch of creditor type was produced.China is the biggest developing country, so it musr encounter considerable currency mismatch risk, and during the developing of China’s currency mismatch there was a shift from the debtor type to the creditor type. In the1990s, China began to appearing obvious phenomenon of currency mismatch, the domestic and foreign scholars also began to pay attention to China’s currency mismatch research, the study found that China does have serious risk of currency mismatch, and the trend of development is rising. At present China’s currency mismatch is the type of creditor, if we want to fully grasp the size of the degree of currency mismatch in China we have to consider all the causing reasons. But so far the scholars’research of the measurement model have not yet reached a consensus, and t the existing measurement models have some shortcomings, either the factors were not considered fully, or ignored the correlation between indicators, etc.Currency mismatch measurement model and the selection of indexes and data are important to the accurately measurement of currency mismatch. This article is ttying to make up the shortcomings of the existing currency mismatch measurement models based on the study and analysis of them. Under the condition of China’s currency mismatch particularity, I found that we can draw lessons from the economic climate index synthetic methods——principal component analysis, to make a currency mismatch index. The index is used to get the degree of China’s currency mismatch in each of the years. Principal component analysis synthetic index overcomes some significant shortcomings of the previous models, and I think it is more suitable to measure the degree of currency mismatch of China.In this article, the research on China’s currency mismatch is divided into five parts. In the first part, I write background, significance and present situation of currency mismatch research, thinking that China’s currency mismatch research is necessary, and the measurement models existing at present stage are not perfect, and we need to revise them further. Then, the second part of the article is talking about several important theories of currency mismatch and the measurement model that related to the following research, in this part also contains the defects of each model and how to use the theory of principal components to design a synthetic index.Then in the third chapter I will give detailed analysis of the present situation, the characteristics and the ten aspects’internal causing reasons of China’s currency mismatch. This part mainly analyzes ten aspects internal factors of China’s currency mismatch, and external factors are not talked about much because of they are not quantitative analysis for the following index selection and principal component analysis.In the fourth part of the paper, at first I choose14indicators and the data of those indicators according to the previous studying of affecting factors of China’s currency mismatch, then synthesized index of China’s currency mismatch, and calculate the degree of China’s currency mismatch during1985and2013, found that China’s currency mismatch, experienced a process of a shift from debtor type to the creditor type, on a certain level of volatility it has a rising trend, and we can see it’s upward trend is easer in recent years, but the overall degree is still very serious.The fifth chapter is the empirical analysis. In this part I will give the further empirical tests on the affecting factors of China’s currency mismatch. The empirical tests include ADF test, building of regression equation and Granger causality test. An index of currency mismatch and the relationship between various factors are analyzed, and found there is co-integration relationship between currency mismatch indexes, but not all of the factors and the index of the currency mismatch have cause and effect relationship. This part sums up the factors that affect the degree of currency mismatch of China:(1) the level of the domestic financial market development (2) the internationalization of RMB (3) the speed of economic growth (4) the rate of inflation (5) spreads (6) export-oriented strategy (7) imports.In the last part of this paper, the conclusion and policy suggestions will be written. According to the theoretical, qualitative and quantitative analysis in the first five chapters, I make a conclusion and put forward some policy suggestions to weaken the degree of China’s currency mismatch degree, including promote international status of RMB, develop the domestic financial market, balance the import and export’s structure, implement a symmetry of monetary policy, strengthen supervision and so on.