Analysis Of The Influencing Factors Of Short-term Cross-border Capital Flow Volatility

The development of the process of capital account liberalization has led to the global cross-border capital frequently in and out of emerging economies,which resulting in the volatility of cross-border capital flows Exacerbated.With the development of financial globalization and integration, volatility of cross-border capital flows have a contagion effect, which not only disrupt their own economic activities, but also has a negative impact on the global economy .Multiple episodes of financial crisis in the 1990s highlighted the disruptive potential of capital flow volatility beyond a national border.Cross-border capital flow volatility and inadequate ability of developing economies has become one of the problem of international policymakers' main worry. As the largest developing country,China continues to develop it's foreign economic since the reform and opening up,the economic and financial openness continues to increase.The high speed development of economy makes the cross-border capital pouring into our country,the scale of capital flows expands gradually. However ,as our country economy enters a new normal,the economy facing downward pressure,and combined with the impact of Federal Reserve raising interest rates, the cross-border capital flow of our country facing a greater uncertainty and instability,and it's volatility increased significantly.Massive capital inflow and outflow fluctuations will exacerbate the volatility of capital,increase the exchange rate depreciation and asset prices fall, destroying the financial stability,and thus affecting the macroeconomic stability and development. Therefore,measuring the volatility of short-term cross-border capital flows and exploring the influencing factors of it's volatility will help policy makers to develop more targeted measures to prevent capital fluctuation influencing economic fluctuations.In order to study the volatility of short-term cross-border capital flows in China and its influencing factors,firstly, on the basis of the related literature review,the paper combs the relevant theories of cross-border capital flow and the factors affecting the fluctuations of short-term cross-border capital,which draws the five factors that affect the fluctuation of short-term cross-border capital flows,such as interest rate, exchange rate,domestic macro- economic situation,asset price and global factors.Then,the paper makes a multidimensional measure of the volatility of short-term cross-border capital flow in China by using various measurement models. It is found that before the exchange rate reform in 2005,China's short-term cross-border capital flows and it's volatility levels are relatively small,however,since the first exchange rate reform in 2005,the volatility of short-term cross-border capital increased significantly;After the financial crisis, the volatility level rises further;and in the latest two years,the short-term cross-border capital flows are the obvious features of two-way volatility,and the volatility level has remained at a high level. Then the paper uses the monthly data of our country,and takes the exchange rate reform as a time break-point,which makes the sample divided into two interval January 2000-June 2005 and July 2005-August 2015. Then using the VAR model ,and through the ADF test, cointegration test,impulse response analysis and variance decomposition to compare the difference of the factors influencing the volatility of short-term cross-border capital before and after the exchange rate reform. The results show that,before the reform of exchange rate,the main factor affecting the volatility of short-term cross-border capital is the domestic economic fundamentals,while after the reform the global risk factor become the greatest influencing factor. and the reform makes the impact of the assets yields on the the volatility of short-term cross-border capital become more intense,and the effect lasts for a long time,the profit-driven potential of capital is more obvious. Finally , the article puts forward some concrete measures and suggestions from several aspects,such as the financial reform, capital project regulation, the cross-border capital regulation, changes in economic development patterns and international coordination and so on.