Geopolitical Risks And International Capital Flows

Since the 1990s,with the deepening of globalization and financial integration,international capital flows have entered a new period of development.The scale has been increasing day by day and the flow has become more and more frequent.Its volatility is also expanding,not only the net fluctuations in international capital volatility intensified,the total flow to show a greater volatility.With the continued impact of the global financial crisis,the scaleof cross-border capital flows has drastically reduced,and the overall size of global cross-border capital capital flows has contracted to $ 1.04 trillion in 2008,down by about 40%,while the size of international capital flows in emerging market countries But also from the historical highs of $ 0.98 trillion in 2007 to $ 670.5 billion in 2008.With the financial crisis gradually stabilized,the developed countries through the quantitative easing policy to release a large number of liquidity,capital flows into emerging market countries in 2010 and rapid rebound to 0.85 trillion US dollars.According to IMF statistics,the total size of global capital flows in 2016 was about $ 1.43 trillion,down 5.6%from 2015.In the context of the global economic turmoil,the political conflicts between the geopolitical areas have increased significantly and become more intense.2016 geopolitical risk has risen to the core risk of global economic recovery,and geopolitical instability is not only a phased phenomenon,but will be a long-term trend.This paper first summarizes the previous theories and literatures on political risk and foreign direct investment,and finds out that the research on the influencing factors of international capital flow is too numerous,but there is little research on the problem of international capital flow from the perspective of geopolitical risk.Based on this background,this paper associates geopolitical risks with international capital flows to explore how geopolitical risks affect the capital flows of developed and developing economies.On the theoretical side,this paper expounds the link between geopolitical risk and extreme risk spillovers from the perspective of extreme risk infection.Extreme risk of the existence of net infection effect,the outbreak of risk sources caused by changes in the psychological factors of the main investment,with the net infection of the dominant factors to form transnational "herd behavior",resulting in the source of risk outbreak of state-owned trade,financial links or between countries Other countries with similarities are at risk of infection.This shows that geopolitical risk has an influence on international capital flows.These explorations provide a solid theoretical basis for the follow-up empirical research.Based on the above theory,this paper analyzes the influence of geopolitical risk on the international capital flow of the sample country under the premise of further construction of the geopolitical risk index(GPR).Using the solid-state effect model,the international capital flows of 45 sample countries from 2005 to 2015 were affected by geopolitical risk,and the impact of capital flows on emerging economies and developed economies was affected by geopolitical risk The relevant conclusions.From the empirical results,geopolitical risk has a direct negative effect on the net capital inflow of the sample country,while the net inflow of capital in emerging economies is more sensitive to the geopolitical risk index and is more vulnerable to international capital flows during political turmoil The While the developed economies are less affected by geopolitical winds,especially in the United States and Japan,in the period of increased risk but there is a clear refuge capital inflow.In addition,this paper analyzes the impact of other relevant factors on international capital flows,such as the Chicago Board Options Exchange Volatility(VIX)index,the country's discount rate,per capital GDP,trade liberalization,financial deepening,US short-and long-term bond yields Wait.Through the study found that these are also an important factor affecting the international capital flows,and this article has also put forward relevant suggestions.Finally,according to the results of theoretical and empirical analysis,the relevant policy suggestions are put forward from the aspects of reducing the influence of geopolitical risks,enhancing the effective coordination between the developing economies and the developed economic and economic policies,strengthening the awareness of the risks of the enterprises Optimize the choice of capital controls in various countries.