International Capital Flows And Domestic Investment Fluctuation

With the opening of the capital account,the international capital flows of China have continued to expand,and its uncertainty has also increased.In recent years,the growth rate of fixed assets investment in China has experienced a downward trend,showing a certain correlation with the balance of capital and financial accounts.The existing literature mainly investigates the impact of international capital flows on domestic investment at the macro level,which neglects the microeconomic foundation.Therefore,this paper analyzes the effects of international capital flows on domestic corporate investment from the microeconomic perspective of corporate investment.After analyzing the current situations of the international capital flows and domestic investment in China,this paper extends the Euler equation model based on the corporate investment theory to establish a structural empirical model.The generalized method of moment(GMM)is utilized to solve the endogeneity problem.And the lagged variables of international capital flows are used as instrumental variable to estimate the international capital flows and corporate investment.This paper merges the micro-data of Shanghai and Shenzhen A-share listed companies from 2003 to 2017 with the macro-data of international capital flows.After distinguishing the types and directions of international capital flows,this paper discusses the impacts of the inflow and outflow of direct investment,portfolio investment and other investment on corporate investment respectively.In addition to the level of international capital flows,this paper adopts the GARCH(1,1)model to further explore the relationship between the uncertainty of international capital flows and corporate investment.Besides,considering the dimensions of time and individual in the panel data structure,this paper analyzes the factors of financial crisis and corporate ownership.The dummy variables of financial crisis and corporate ownership and their interaction terms with international capital flow are introduced as robustness tests.This paper mainly draws the following conclusions:(1)International capital inflows have a positive impact on domestic corporate investment,while the international capital outflows have a negative impact on corporate investment.(2)The increase in the uncertainty of international capital flows also has a negative effect on the corporate investment.(3)The impact of financial crisis on international capital flows and corporate investment is asymmetric,as the financial crisis weakens the positive effect of international capital inflows on corporate investment and strengthens the negative effect of international capital outflows on corporate investment.(4)Corporate ownership has a significant impact on the relationship between international capital flows and corporate investment,which is related to the direction of international capital flows.Therefore,on the premise of maintaining financial stability,China should promote the positive effect of the international capital inflows on corporate investment and reduce the negative effect of the international capital outflows and the uncertainty of international capital flows on corporate investment.