Research About The Influence Of Capital Sudden Stop On Financial Crisis

Nearly 20 years,the rapid development of world economy have driven the global financial integration,and the scale of capital flows between countries are gradually expanding.International capital flows not only affects the development of domestic economy,but also become the important factors which influence the stability of the financial.Especially in the past few decades,emerging market countries gradually is increasingly relationship with the development of world economy,and the opening of capital account attracts other countries capital inflow their own country,Emerging market countries use these capital inflows to promote the development of national economic.However,the long-term depending on foreign capital inflows or unregulated allowing international capital inflows,the emerging market countries will often suffer serious harm.Since the end of the 20 th century,emerging economies have experienced a few times larger financial crisis.Summary these happened financial crisis,we can found that the formation of these countries in the early stage have suffered a huge international capital inflows.However,international capital inflows slashing suddenly happened after some period and even cause the phenomenon of massive capital outflow.This article will put these two kinds of abnormal capital flow state defined as "sudden stop" capital.The phenomenon of "sudden stop" seriously affect the economic stability and development in emerging markets,which can lead to financial crisis,and it will cause serious damage to the economic development.So the capital sudden stop and the relationship between the financial crisis has important significance.This article selects 61 emerging market countries from 1997 to 2013 panel data,using Probit model empirical research on the sudden stop of capital flows in emerging markets to the impact of the financial crisis.This paper defines the financial crisis as a banking crisis and currency crisis.The article gives a definition of "sudden stop" capital into three aspects: the external interruption of capital gross inflow result in sudden stop capital caused by capital flight,domestic investors' s capital flight result in sudden stop capital and net capital inflows fell sharply to measure sudden stop capital.Then we define banking and currency crisis respectively.Finally,this paper studies the impact of ‘capital sudden stop' on banking and currency crisis.It can be indicated from the empirical results that sudden stop of external capital inflows and net capital will significantly increase theprobability of banking crises,while the influence of domestic investors' capital outflows on banking crisis is not remarkable.Sudden stop of external capital inflow will increase the probability of currency crisis,while the influence of domestic investors' capital outflows and sudden stop of net capital inflow on currency crisis is not remarkable.Besides,we notice that the growth of GDP,changes of exchange rate,worldwide financial risks and economic growth rate of developed countries all exert significant influences on banking crisis.The growth of GDP,changes of exchange rate,the level of foreign exchange reserves,the rate of inflation,worldwide financial risks,government debt and NPL ratio all have significant influences on currency crisis.