The Effect Of International Capital Flows On Credit Boom And Experimental Study Of Emerging Market Economies

In recent years,rapid growth of bank credit is a commom problem that emerging market countries faced with.When bank credit is beyond the normal demand of economic fundamentals,it would be a impact to the banking system and macroeconomic stability.under the background of financial liberalization and capital account opening,large numbers of capital flow surge in emerging economies,which has become an important factor that lead to lending boom in emerging economies.This paper make a analysis of the channel about how international capital flow to influence bank credit,several theories include money supply theory,assets price mechanism,pro-cyclical of bank leverage,and corporate balance sheet channel.In empirical apart,we selecet a sample of 34 EMEs’ yearly data during the period of 1980-2015,and we use the criteria made by Gourinchas et al(2001)to identify credit boom,there are 112 lending boom episodes over our entire time dimension.However,systemic banking crisis happened within two years after 32 of the booms.With credit boom as the dependent variable and international capital flow as the independent variable.The empirical results show that the effects of different types of international capital on credit booms is different,the impact of direct investment is significantly negative,which means FDI would reduce the possibility of credit boom,while the impact of securities investment and international on domestic lending boom is significantly positive.In addition,we depict the dynamic behavior of capital inflows around credit booms using event analysis by creating a 9 years window centered in time T where T indicates the start of a credit boom episode.Also,we distinguish bad booms which ends up in a systemic banking crisis from regular ones.The results show that there is a magnitude of the build-up in net other inflows before the start of a bad boom.Finally,according to the result of empirical analysis,several policy suggestions are made: Strengthen the management of cross-border capital flows;capital account liberalization should adapt to the development of financial system;establishment of Macro Prudential Policy Framework.;make full use of exchange rate regime.