Research On Management Of International Capital Flows In Emerging Asia

The management of international capital flows is a key issue of internationaleconomic. But the studies are limited in certain policy, especially in capital controls. Infact, the management of international capital flows is a system. Besides the capitalcontrols, it refers to the macroeconomic and the finance. So it is impossible to find asingle policy to manage the surge of the capital inflows effectively. Based on the policyframework of the management of international capital flows, the thesis, which considersthe specific situation of Asian countries, focuses on the management measures ofinternational capital flows after1997financial crisis among the Asian countries. It refersto the adjustment of macroeconomic policy, the reform of financial system and capitalcontrols. The thesis tries to provide some references on Capital Flow measures to Chinaand the whole Asia.Firstly, there are theories on the management of international capital flows, whichare the influence mechanism of the international capital flows and the understanding ofits risk. The influence mechanism includes the exchange rate mechanism, the asset pricemechanism, the wealth effect mechanism, the reputation mechanism and the policy effectmechanism. The international capital inflow brings host countries not only the economicbenefits, but also the risks of the macroeconomic and financial stable. If the risks are notmanaged appropriately, the risk of the economy will be accumulated. Once the externalshocks or the sudden change of the expectation, the accumulated risks of the economywill release, which may lead to systemic financial crisis.Secondly, considering the specific situation of Asian countries, the thesis focuses onthe management measures of international capital flows after1997financial crisis amongthe Asian countries, especially the effect of the measures. When the international capitalinflows are massive, each country may sterilize in short term; and in long-term, they willcarry out flexible exchange rate regime, enhance the macroeconomic policies and perfectfinancial system. But as the cost of sterilization will increase, it is easy to have thedilemma—to keep stable interest rate or stable exchange rate. However, the reform ofexchange rate and perfecting financial system needs a long-term to see the effect, so each country may use capital control measures in short and medium term to make up theshortfall of the two measures. The experience of Asian emerging economies shows thatthere are no such capital flow managements that fit all and fix a certain form, and nearlyall the policies have their limitation. To achieve the desired result, the capital flowmanagements should be adjusted according to the specific situation of the country,including policy objectives, the cause and persistent of the capital inflow, the politicalenvironment of the capital flow management and some other limitations. At the sametime, the experience of Asian emerging economies indicates that it is important todevelop and apply the policy tools, and the intelligence and courage of the policy makersare also vital for achieving the expected results.Finally, the thesis gives analysis to the challenges and future of the internationalcapital flow management after the global financial crisis. The financial crisis has greatimpact on Asian import and export trade, and it also affects the economic growth. Withthe uncertainty of the external economic conditions, the management of internationalcapital flows in Asia confronts many challenges. In addition doing more of what has beentried before, Asian countries ought to apply fiscal policy more actively and try topromote economic growth. What’s more, they ought to improve the cooperation in theregion and the whole world.