A Study On The Impact Of Capital Flow To The Stability Of The Financial Systems In Emerging Market Economy

Since the early and mid-1990's, a number of changes have taken place in Emerging Market Economy (EME). As one of EMEs, China has got great benefits from liberation. However, the huge capital flows also set the EMEs' macro-economy, especially financial safety in great danger.The chapter one introduces the situation, character of the international capital flow, the reason that the capital flows to EMEs, and a rough retrospect of the theory about capital flows and capital controls.The chapter 2 firstly identifies the EMEs, as well as their basic economic element. The influence of capital flow to EMEs can be summarized as: the frequent breakouts of financial crisis; the increase of the frangibility in EMEs' financial systems; the fluctuation in EMEs' financial markets; the closer co-relationship between domestic and foreign markets.The chapter 3 introduces the measures that Chile has taken to manage the capital flow, then the discussion about the necessity of capital controls.The last chapter is the summery of this paper.