Short-term International Capital Flows On China's Macroeconomic Impact

Sub-prime mortgage crisis in 2008 has evolved into a global economic and financial crisis. The short-term international capital flows is an important way in the conduction process of crisis, which led to the new study of short-term international capital by the domestic and international economists. Under this background, this paper in-depth researches the inflow and outflow of China's short-term international capital related issues. Although the number of papers have discussed many of our short-term international capital flows, most just about data and events within a few years for some of the discussion and study, the lack of overall understanding of our short-term international capital flows within a long period, so the conclusion maybe polarity and limitations. In this paper, based on the data of inflow and outflow of short-term international capital of China which from 1991 to 2009 for the study, precisely to make up for these deficiencies.Firstly, this paper summarizes the definitions of short-term international capital of domestic and foreign academics, which from three perspectives: the time standard,speculative motives standards and liquidity of the standard. In the second part of the paper, it observes changes in short-term international capital flows which from the changes of the international monetary system, and also elaborates on the pattern and development trend of short-term international capital flows since 1990s and after the sub-prime crisis. From this part of the research, it can be seen that the influence of short-term international capital on the world economy continues to grow. In the third part, it summarizes the theories and literatures of domestic and international academic research related to short-term international capital flows, which mainly concentrated in the two areas: the drivers and the economic effects.As the complexity of short-term capital, there is no consensus of academics on the calculating the size of the flow, different ways to measure the same year may have large gap, so the forth part composites the four kinds of calculation methods which mainstream in domestic and international, and in order to get a more accurate data. The fifth part is the important point, it uses modern econometric tools to empirical analysis on the economic impact in China of short-term international capital. It also adjusts the cointegration theory to study the long-term impact on the macroeconomic impact in China of short-term international capital and direct investment, with the smoothness of data, which be followed by the EG two-step method to construct the regression equation, obtained the conclusion that the influence of short-term capital inflows to the extent of China's economic growth is the same as FDI impact on China's economic growth. Moreover, it establishes a short-term net capital inflows and currency supply,stock prices VAR model, and then uses Granger causality to test their relevance, and use the same method to test the relationship between short-time international capital and house prices, the conclusion is that the correlation of them is not strong, but they are mutually causal relationship, which has effectively explained the part of reason on the irrational of Chinese real estate market. In the last part of the paper, according to the previous study results, there are some policy recommendations to our short-term capital flows monitoring accordingly.