A Study About The Influences Of Capital Control On Economic Development And Financial Stability Of Asian Developing Countries

The integration of global economy makes the opening of capital account as an essential choice for opening economic body. However, the crisis which frequently happened in new market shows that it will cause deathblow and disaster for correlative countries'economy if they open the market and relive capital control in an earlier and improper condition. The American subprime mortgage crisis happened in the summer of 2007 spreads to be a systematic crisis around global financial markets after September 2008. It results in the decline of three largest global developed economic bodies in the second half of 2008. The continuing extension of the global financial crisis leads to impetuous arguments on the opening and controlling of capital program in academic field home and broad. More and more scholars are standing on the side of limiting capital flowing and doing capital controlling. This thesis makes researches on the capital controls among Asian developing countries, analyzes and certifies the effects to the economic development and financial stability from the capital controls via setting up panel data models based on the analysis of the influence of capital controls among developing countries to economic development and financial stability. It concludes that we must keep prudential attitude and make prime conclusion which matches other financial reform when we push forward to capital account's opening.There are five chapters in this study.The first chapter is the introduction that includes significance of the topic, literature description, structure, innovation and weakness. Firstly it explains the closed ties among countries in the background of economic globalization and the slow down of China's capital controls in recent years. As the frequently happening of financial crisis in new capital markets and the further deepening of American subprime mortgage, capital controls become an issue concentrated by the academic field. Secondly, it generalizes latest achievements in the influence of capital controls to economic development and financial stability. It then clarifies the structure. Finally, it briefly introduces the innovative points and weakness.The second chapter introduces the definition and types of capital controls, and then recalls the experience of capital controls among Asian developing countries and the current circumstance of capital controls in China. As we known that Thailand and Malaysia implemented capital controls in Asian financial crisis. However, it makes different results because of the different economic environment in the two countries. Capital controls in Thailand become a potential element which makes the crisis worse, but the capital controls in Malaysia makes it return to economic growing. Prudent and gradually growing policy in Indonesia and India are our good examples, though their models in capital accounts opening are different. China slows down capital controls in recent years and that makes us to observe the methods and results of capital controls in a new eye.Chapter 3 explains theoretically the influence to economic development and financial stability from capital controls among developing countries. Firstly, it analyzes the methods and property of developing countries'capital controls'influence to economic development. It concludes that capital controls will limit economic development in developing countries. However, the releasing to capital controls promotes the economic development as well as brings huge crisis to developing countries'finance. This thesis analyzes risks in three aspects including excess credits of banking organizations, entrance of foreign invested banks and foreign investment.Chapter four takes the influence of capital account's opening to the unstable degree of finance and to macro economic growth as researching objects. It analyzes facts through establishing panel data models. The results shows that capital account's opening will deteriorate the environment of financial stability regarding to Asian developing countries, financial development will have a beneficial impact on financial stability. The increment of import and export, FDI and current account will also take varying negative effects to its stability. Opening degree's growing of capital account and financial developing degree's growth make a little negative effect to unit capital investment's domestic products. Therefore, capital account's opening will deteriorate the environment of financial stability in developing countries, however, the financial degree of developing countries will take double effects to macro economic: on one side, it improves the scale and efficiency for a countries'financial industry, strengthens the power of a countries'economic growth; on the other side, it may produce financial foam and rent seeking because of overage speculation in a certain condition. Furthermore, it may take negative effects to financial stability and macro economy.Chapter five concludes the complicated relations among capital controls, unstable financial degrees and macro economic growth based on the first two chapters'analysis. It also raises relevant policy advice to the methods and time of China's capital accounts'opening.