Research On How Capital Account Opening Influences Macro-economy

In May 2012, People’s Bank of China said in a statement that the condition of speeding up our country’s capital account has been basically mature. In November 2014, the Shanghai port has completed all preparatory work on schedule, which means that the liberalization of Chinese capital account is already in order. The capital account liberalization impacts macro-economy. How to expand openness, how to avoid the potential risks and how to supervise the macro-economy has become a hot topic in the current theoretical academe.From the perspective of empirical analysis, using panel data systematical GMM method to examine effects of the capital account liberalization on economic growth, including per capita gross domestic product, household final consumption expenditure and general government consumption expenditure. And it provides policy recommendations of our country’s opening capital account based on the empirical results.Specifically, this paper is divided into five chapters. The first chapter is the introduction of the whole part, it discusses the background of the topic, core concepts, domestic and foreign literature reviews, and introduces the research method, content and innovation points of this paper. The second chapter describes the evolution and development of capital account liberalization chronologically. The third chapter is a measure of capital account liberation. After the introduction of various calculation methods, the paper uses the improved strength method to estimate the capital account liberalization index of the 40 countries and regions, including China. The fourth chapter uses GMM model to do research on systemic impact of capital account liberalization on macro-economy. It collects data between developed and developing countries, uses GMM-SYS method to make parameter estimation, while inserting instrumental variables to solve the problem of endogeneity, which is aim to achieve endogeneity without increasing exogenous variables. The model results show that the capital account liberalization index affecting economic growth targets of developed countries are not significant, which indicates that the capital account has reached relatively free in foreign countries until 1999, and its impact on economic growth is no longer obvious. For developing countries, it has the opposite outcome. The capital account liberalization index can significantly promote the developing countries per capita and household final consumption. Therefore, the result provides a theoretical support of Chinese opening of capital account. The fifth chapter makes a brief summary of the model conclusions and provides some policy recommendations in view of how to open the capital account and how to avoid potential risks.