| Following the 19th National Congress of the Communist Party of China,China has set out a path of promoting high-quality development through high-level opening-up.With the continuous improvement of China's financial opening-up level,foreign investors'allocation of China's securities assets has been supported by numerous institutions and policies,and the attractiveness of China's securities market has been continuously enhanced,and the enthusiasm and convenience of foreign investors'participation have been significantly improved.On the one hand,the introduction of international investors is conducive to the injection of fresh blood and incremental capital.International investors focus on value investment and long-term investment,which is of positive significance for stabilizing the market.On the other hand,the introduction of international investors is an inevitable requirement for China to build a market-oriented and open financial market system,as well as an inevitable choice to promote economic quality,efficiency,transformation and upgrading under the new normal of the economy.In terms of market size,China's bond market and stock market rank the second in the world,so the capacity of the securities market is large.However,compared with other major securities markets,the proportion of foreign capital in China's securities market is still low,and China's securities market still has great potential in attracting foreign investors.At the same time,the volatility risk of international portfolio capital flows is also a problem worth paying attention to.According to the Global Financial Stability Report released by the International Monetary Fund in April 2020,since the COVID-19 pandemic,emerging economies have experienced severe reversal of portfolio capital flows,which poses serious macroeconomic challenges for emerging economies with relatively fragile financial systems.As the world's largest emerging economy,China's financial opening-up process has significantly accelerated under the strategic guidance of promoting a new pattern of all-round opening-up.China has implemented a number of policies,including the Shanghai-Hong Kong Stock Connect,Fund Swap,Shenzhen-Hong Kong Stock Connect,Bond Connect,and further abolished the Qualified Foreign Investor Institution and the RMB Qualified Foreign Investor Institution,thus expanding the channels for international capital to enter and exit China.Due to the factors of uncertainty and instability in the global economy is increasing,the occurrence of large-scale cross-border portfolio investment will further aggravate the volatility of capital flows.Especially,large-scale arbitrage capital flows and outflows will seriously influence the realization of China's international balance of payments,and exacerbate the systemic risk in the financial system,which will have a great impact on the high-quality development of China's economy.How to attract international portfolio investment and improve international level of capital market while reducing the volatility risk is a problem worthy of in-depth study.Therefore,this paper takes international portfolio capital flows as the core research object,focuses on the impact of financial development and institutional quality on international portfolio capital flows,and further analyzes the role of financial development and institutional quality in preventing the macroeconomic risk of extreme international portfolio capital flows.In the first place,this paper focuses on financial development,examines it's impact on the scale and volatility of international portfolio capital flows,and further discusses the heterogeneity of the impact of financial development in different types of economies and different types of international portfolio capital.This paper also analyzes the impact of financial development on international portfolio capital flows under different levels of capital account opening.The results show that financial development is beneficial to increase the scale of international portfolio capital flows,but does not significantly reduce its volatility risk.The comprehensive development of financial institutions and financial markets in depth,accessibility and efficiency is conducive to attracting international portfolio capital.Greater depth and efficiency in financial markets will exacerbate the volatility of international portfolio capital flows,and the improvement of financial market accessibility will reduce the volatility.What's more,the financial development of developed economies promotes the scale of international portfolio capital flows,while the financial development of emerging economies reduces the volatility of international portfolio capital flows.Besides,financial development is beneficial to attract international bond capital,but at the same time increases the volatility risk of equity capital flows.In addition,when capital account opening is at a high level,financial development plays a stronger role in attracting international portfolio investment and plays a weaker role in stabilizing it.Moreover,this paper studies whether institutional quality can promote international portfolio capital flows and reduce its volatility risk,and further discusses the heterogeneity of institutional quality's impact and the intermediary role of sovereign credit rating.The empirical results show that institutional quality can not only attract international portfolio capital,but also reduce it's volatility.Besides,the institutional quality of developed economies not only promotes international portfolio capital flows,but also reduces it's volatility,while the institutional quality of emerging economies is relatively weaker in attracting and stabilizing international portfolio capital flows.In addition,the improvement of institutional quality is beneficial to attract and stabilize international bond capital flows,but has no significant effect on the scale and volatility of international equity capital flows.Furthermore,sovereign credit rating is an important channel through which institutional quality affects international portfolio capital flows.Finally,this paper focuses on the economic effects of extreme international portfolio capital flows,and continues to examine the role of financial development and institutional quality in resisting the economic risks of extreme international portfolio capital flows.It is found that the sudden stop of international portfolio capital flows significantly reduces the economic growth of a country.Moreover,the sudden stop does not have a significantly adverse effect on the economic growth of developed economies,but has a significant negative impact on the economic growth of emerging economies.In addition,the sudden stop of international equity capital flows and international bond capital flows is all not conducive to a country's economic growth.What's more,financial development plays a positive role in reducing the negative impact of sudden stop.Institutional quality also helps absorb the negative impact on economic growth.Possible innovations in this paper are mainly reflected in the following points.Firstly,existing literature mainly focuses on the scale of capital flows,and relatively few studies focus on the volatility.This paper not only studies whether financial development and institutional quality attract international portfolio capital,but also studies whether financial development and institutional quality reduce the volatility risk of international portfolio capital flows,which is a useful supplement to the existing literature.Secondly,this paper uses a financial development index,which takes into account the depth,efficiency and accessibility of financial development,overcoming the deficiency of existing literature that only considers the influence of financial development scale,and providing a new perspective for studying the impact of financial development.In addition,this paper also studies the impact of financial development on different types of economies and different types of securities from the perspective of scale and volatility,which is conducive to a more comprehensive understanding of the relationship between financial development and international portfolio capital flows,and enriches existing studies.Thirdly,this paper deeply analyzes the influence channels of institutional quality on the scale and volatility of international portfolio capital flows,and further explores the heterogeneous influence of institutional quality from the perspective of different types of economies and different types of securities,which makes up for the lack of mechanism discussion in existing studies.Fourthly,since the flows of international portfolio capital are more unstable,this paper studies their impact on economic growth under the state of extreme flows and also analyses how to prevent the economic risks of extreme international portfolio capital flows,which makes up for the deficiency of existing literature that discuss only from the perspective of total capital flows,expanding the existing research content. |
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