Sudden Stops In The International Capital Flows And Economic Growth In China

In the context of financial globalization,the relationship between countries in international capital flows is becoming increasingly close,and the scale of international capital flows has been expanding year by year.Since the 1990 s,China has maintained an international capital surplus for most of the years.However,since 2011,the net inflow of international capital has experienced a sharp decline or even reversal.In the second quarter of 2014 to the third quarter of 2016,capital and finance account of China has been showing a "deficit",and the scale of the deficit has been expanding gradually.China is facing a sharp decline pressure in international capital inflow.What factors have led to the occurrence of this phenomenon? What is the impact of a sharp decline in net international capital inflows on China's economic growth? The study of the above problems is of great practical significance to China,which is moving towards capital opening and internationalization.The study is based on the international capital flows in China during 1998Q1-2016Q3(where "Q" is the quarterly logo and the same below).First of all,we accounted for the data source of China's international capital flows,and the actual situation of China's international capital flows was described.The concept of sudden stop was defined and the period of sudden stop in the international capital flows in China was identified.It was found that China's international capital flows suffered sudden stops in 2006Q3,2009Q1,2012Q1-Q4,2014Q4 and 2015Q1-Q4.Secondly,the dummy explanatory variable "sudden stop" is used to construct the Probit Model to analyze the effect of the ten explanatory variables in China's domestic macroeconomic fundamentals,financial sector,international openness,international external shocks on sudden stop.We found that the current account balance,trade openness,international economic growth,international liquidity,investor sentiment have a significant positive effect on the probability of sudden stop;and domestic economic growth,domestic real interest rates,the total amount of international direct investment have a significant negative effect on the probability of sudden stop.Thirdly,considering that when the economic system is in the sudden stop state and in the normal state,the relationship between changes in international capital flows and economic growth may be different,we innovatively introduced Markov Switching Vector Autoregressive Model(MS-VAR Model)to study the impact of the sudden stop in China's international capital flows on the economic growth.We found that the economic system was significantly divided into "normal state" and "sudden stop state".We used the regime-dependent impulse response functions to analyze the effect of the shock of the international net capital inflow on the economic growth when the economic system is in the sudden stop state and the normal state.We found that: when the economic system was in the normal state and the sudden stop state,given the international net capital inflow rate of a standard deviation of the positive impact,quarter-on-quarter growth rate of GDP has a positive response.The cumulative value of the cumulative impulse response in the sudden stop state is 0.12% lower than that in the normal state,indicating that the occurrence of sudden stop will inhibit the economic promotion of international net inflow.Finally,combined with the actual situation of China's international capital flows,we put forward proposals to prevent sudden stop risk and maintain stable economic growth in China: first,closely monitoring the international capital flows and enhancing the control of the mutation;second,vigorously developing the Chinese economy and promoting economic development stably and healthily;third,coordinating the relationship between financial globalization and domestic economic development.