A Research On The Transmission Channels And Impact Of China's Short-term Capital Flows

With the continuous deepening of financial openness,the RMB has achieved steady progress in the process of convertibility under capital projects,and the transmission channels and impact issues of short-term capital flows have become the focus of current research.The current international and domestic environment of China's short-term capital flows are undergoing new changes.On one hand,the United States has withdrawn from the Quantitative Easing monetary policy since 2014 and started the process of raising the interest rate.However,Japan,the European Union and other advanced economies are still implementing Quantitative Easing monetary policy,the monetary policies of advanced economies have been divisive.On the other hand,China's economic growth rate is slowing down,the interest rate and exchange rate reforms are steadily carried out.With the RMB becoming one part of SDR,the opening process of capital account is accelerated.In this new background,China's short-term capital flows show new features such as the rapid expansion of scale,one-way outflows,increased securitization derivation,high speculativeness and destructiveness.It has potential impact on China's financial stability.Therefore,it is of great theoretical and practical significance to identify the new features of China's short-term capital flow and then analyze its transmission mechanism,and provide reasonable suggestions for its supervision.Under the background that the current international and domestic environment of short-term capital flows are undergoing new changes,what are the new characteristics of China's short-term capital flows?What are the main transmission channels of the short-term capital flow?What are the main impact of short-term capital flow?Answering these questions needs a systematic research.From the relevant research of foreign and domestic scholars,we can see that most of the foreign scholars'researches are based on emerging economies or developed economies as a whole,and they are not targeted to analyze short-term capital flow in China;Domestic scholars' research focuses on qualitative research.The empirical analysis is not a lot,and the data used are mostly around the exchange reform.The analysis about the new features of short-term capital flows are little.Therefore,analyzing the new short-term capital flow and its features,using the latest data to make empirical analysis is of great importance.It can not only enrich the original research,but also promote the identification of transmission channels of short-term capital flows and effective supervision.This article is mainly divided into five parts:The first part is the exordium.It introduces the background of this research that the Fed withdrawed from the Quantitative Easing monetary policy and started the process of raising interest rates.The process of internationalization of the RMB has been steadily improved,and the opening of capital projects continues.Next,it gives a summary of the research on the impact of short capital flow,and then summarize the innovation and shortage of the research.The second part is the theoretical definition and theoretical analysis of the short-term capital flow.First,it defines the concepts of short-term capital flow,and then sorts out the theoretical foundations related to the transmission mechanism and impact effect of short-term capital flow.The third part analyzes the transmission channels and impact of China's short-term capital flow.It first analyzes the current situation of international capital flow and the short-term capital flows in China under the new background,and summarizes the characteristics of changes in short-term capital flows.Secondly,it analyzes the impact of short-term capital flow on the effectiveness of China's monetary policy,exchange rate,and stock market,and then describes the current transmission channels of China's short-term capital.The fourth part gives the empirical analysis of short-term capital's transmission channels and impact.It uses variables such as short-term capital flows,Chinese-American spread,RMB exchange rate expectation,stock market prices and year-on-year growth rate of money supply to build a VAR model.It analyzes the impact of short-term capital flows on monetary policy,exchange rate markets,and stock markets.The fifth part is conclusion and policy recommendations,combined with the results of qualitative analysis and quantitative analysis.It provides corresponding policy recommendations for the supervision China's short-term capital flow and the prevention of short-term capital flow's impact.The conclusion of this research shows that the exchange rate market and the stock market are the main transmission channels of short-term capital flow,while the monetary policy channel is not significant.