The Impact Of International Capital Inflow "Sudden Stop" On China's Capital Market

To emerging market countries, normal international capital inflows will bring some benefit.But once the international capital inflows suddenly stopped, even largely outflow,it will has a negative effect on economic output and financial stability. The financial crisis in emerging markets in 1990s, which suggests that the sudden stop of international capital inflows is an important cause of the crisis,often leads to a chain reaction. To this end, this paper mainly research the impact of international capital flows sudden stop on RMB exchange rate and stock market.This Paper select the data between July 2005 and December 2016,using VAR model and Granger test,taking an analysis of the impact of international capital inflow sudden stop on RMB exchange rate and stock market impact. The empirical results show that: (1)the time point of international capital inflows suddenly stop mainly occurred in 2007-2009 years and 2013-2015 years. During the 2005-2016 year,it has experienced roughly 7-8 times capital inflows sudden stop. In the meantime, RMB exchange rate experienced appreciation first and then rapid devaluation in the second half of 2015. The stock market has experienced two rounds of market crash. (2) International capital flows sudden stops does not affect the RMB exchange rate.At the same time, RMB exchange rate does not cause international capital inflows sudden stop, but larger scale of international capital flows will lead to fluctuation of RMB exchange rate. The inflow of international capital sudden stop will lead stock market prices to fall, while increasing volatility of stock price. The sharp decline in the stock market will also lead to international capital inflows sudden stop. So we include that the impact of international capital inflows sudden stop is stronger than the impact on RMB exchange rate.According to the research results, this paper puts forward three suggestions: the capital flow warning mechanism, situation of international capital flow monitoring and evaluation, rational use of foreign capital; strengthening the construction of system of financial and securities markets, resolutely maintaining market stability; gradually promoting the exchange rate formation mechanism, strengthening the trading system of stock market.