Empirical Study On The Factors Of Currency Mismatch

Since the20th century, with the development of economic globalization, States gradually increased foreign exchanges, Capital controls are gradually relaxed, Financial liberalization has become increasingly evident phenomenon. In the process of economic globalization, Factors of production around the world are frequent movement, for emerging market countries; this country usually uses dollar or other key currencies in this movement, because international status is relatively low. In addition to full dollarization countries, such as Panama, emerging market countries generally trading in denominated in foreign currency, foreign currency assets and liabilities will gradually accumulate. In the process of financial liberalization, Emerging market economies have access to the international capital markets; International capital also can enter these countries or regions. In this case, foreign currency assets and liabilities are becoming part of the balance sheet for the emerging market countries. The duration and scale of assets and liabilities often mismatch. Currency mismatch is inevitable. Currently, the currency mismatch has become a global problem. With uneven development of China’s foreign currency assets and liabilities, the government has accumulated a huge amount of net foreign asset; our country has an asset-based currency mismatch. Especially after a long period of stable exchange rate, China implemented the reform of the exchange rate system in2005, liberalizing the exchange rate. Changes in exchange rates will affect the banks and corporate behavior through currency mismatches. Before exchange rate liberalization, the currency mismatch lack attention. But after the exchange rate regime reform, currency mismatch have a significant impact. We can learn more about the national currency mismatches size through measuring the degree of currency mismatch in detail. It’s beneficial to look for management and control policy of currency mismatch through the study of factors that influence the currency mismatch.Chapterl is the research background and significance. Then we reviewed currency mismatch literature. Finally, this paper analyzes innovation and research methods as well as shortcomings. Chapter2is currency mismatch definition n influence and measurement methods. This part mainly use the changes of in the balance sheet net to explain the meaning, and through the introduction of macro and micro effects of currency mismatch to learn more about the risk of currency mismatch. Finally, we determine the selection of AECM method to measure currency mismatch by comparing the domestic and foreign methods.Chapter3use AECM to measure the degree of currency mismatch from1994to2013in chapter3, but this article does not use the continuation of AECM. We find that the country is serious degree currency mismatch, the national currency mismatch degree gradually deepened over time. Finally, then this article analyzed our status and characteristics of currency mismatch. The fourth part is the important part of this article. The factors include the exchange rate regime, the domestic bond market conditions, the level of economic development of the country, economic policies and institutional construction.Then this article use multiple linear regression models to build an empirical analysis of currency mismatch factors. The results show exchange rate regime and the degree of development of the bond does not relieve currency mismatch, but the level of economic growth can ease the currency mismatch. Finally, we try to explain the inconsistent with theory. In the final chapter, we try to raise the policy of managing and controlling currency mismatch based its study result, our proposals include strengthening the exchange rate reform and the development of bond market, balancing the development of economic.In research methods, the paper adopted empirical quantitative and qualitative analysis method. Firstly, we use20years of historical data to analyze the extent of the country’s currency mismatch, then we use qualitative method to analysis its characteristics and trends. Finally, we also use econometric model to analysis the relationship of currency mismatch and its influencing factors, we can find the proposal of controlling and managing currency mismatch on the regression results.The biggest innovation of this paper is to calculate currency mismatch. The paper select current account deficits to calculate net foreign assets, using foreign debt to calculate foreign currency debt, using the sum of foreign debt, bonds and domestic credit to replace total debt.