The Influence Of Sudden Stops Of Cross-border Capital Flows On The RMB Exchange Rate

Capital account of RMB(renminbi) will realize convertibility in 2015, has sparked scholars and experts talking about the opening of China 's capital account again. With the accelerating pace of China's capital account liberalization, cross-border capital flows present new characteristics that their sca les expand continuously and their two-way volatility is increasingly frequent, the liquidity shock is also more obvious. Merely in the environment which domestic economy development is steady and rapid, foreign reserves is full, capital controls is strict, interest rates and exchange rates have not been marketization, the negative influence of the impact has not been highlighted and not enough to trigger a financial crisis yet. However, China's economy has entered the “new normal” era of a periodical growth decline. And the financial deepening reform, such as marketization of interest rate and exchange rate, is in advance unceasingly. Once the liquidity shock of cross-border capital turns into sudden stops will be a huge impact on the stability of the RMB exchange rate, thus influences economic and finance stability.In the dual background of the RMB internationalization and the further opening in capital account, this article carries on thorough analysis on the new characters of China's cross-border capital flows, and uses the empirical analysis to study the impact of sudden stops of cross-border capital flows on the RMB exchange rate. This paper is divided into five chapters. The first chapter is introduction, mainly introduces the background and significance of the research, and reviews the related literatures. The second chapter expounds the related theory of cross-border capital flows and the sudden stops of cross-border capital flows. The third chapter describes the characteristics of cross-border capital flows from four aspects in detail, such as overall scale, direction of capital flows, term structure and currency structure. Simultaneously this part calculates China 's sudden stops of cross-border capital flows and observes the fluctuations of the RMB exchange rate after reformation. The fourth chapter is the empirical analysis about the impact of sudden stops on the RMB exchange rate. This part compares the impact by the Quantile Regression and Ordinary Least Square Method. And it i nvestigates the influence of sudden stops on the RMB exchange rate from the perspective of net flows, gross flows and different types of capital flows. The fifth chapter puts forward the countermeasures and suggestions to prevent the two-way impact of cross-border capital flows.