Short-term International Capital Flows: An Empirical Study Of Impact On The Stock Market Of Our Country

Financial storm swept across Asia in 1997, short-term international capital flows have a huge impact to economy of Asian nations. Our country economy is increasing with a high speed, and international capital flows become more and more frequent, the confinement capital market has been opened. Menawhile the introduction of capital accelerates the economic development of our country, it also attracts short-term speculative capital flows to seek opportunities.Many domestic scholars have researched the destroy of short-term international capital flows or "hot money", but short-term international capital flows and the securities market, or the study of the stock market is not much. At the same time, the measurement of short-term international capital is not comprehensive in details. According to the latest development of the research in recent years, this article hope to discuss the impact of the short-term international capital flows to the stock market in China based on previous studies.This paper, through theoretical research on short-term international capital theories analysis the influence of the economic market, then focus on the source of short-term international capital flows, the direction it will flow to, and the pros and cons of its influence. Based on more new latest study, the using of the adjusted calculation formula of the total short-term international capital flows ‘short term capital flow amount = foreign exchange reserve assets increment adjustment amount- trade surplus amount- adjust the amount of foreign direct investment’, we estimate the amount of short-term capital inflows in China. Adopted dynamic vector regression model(VAR), impulse response function and variance decomposition method we analyze capital flows and stock market volatility then. The final result is: short-term international capital flows influence China’s stock market price, it will help rise and fall the stock market, but it’s not the cause of bubble in China’s stock market. At last, combined with the previous theoretical analysis and empirical results, we give some advice on how to deal with the impact of short-term international capital flows.