Research On The Relationship Between Capital Account Opening And Exchange Rate Marketization In China

With the continuous progress of China's financial reform,more and more authorities and scholars has been paying attention to capital account opening and the exchange rate marketization,which are core parts of China's financial liberalization.It is significant to study the relationship between capital account opening and changes of exchange rate for promoting the process of financial liberalization,improving the capital account opening and the reform of market-directed exchange rate,and promoting its development in accordance with the path suited to the national conditions.When capital account opening is regarded as an important tool for countries to face economic globalization and to actively participate in the international distribution of resources and capital,many developing countries are trying to accomplish the goals.China is no exception.Promoting the opening of capital account is conducive for we to participate in the distribution of elements in the international scope,to use high-quality resources,and to develop our entity economy,using of their own comparative advantages.But the opening of the capital account means that China will have a greater impact on the changes and shocks that have taken place in the international context,becoming a big challenge for the steady development of the domestic economy.Just as the internal balance is the primary goal of the development of a country,the process of opening the capital account should pay attention to the steady development of the domestic economy.As a result,the development of capital account opening needs to be aligned with other policies of financial liberalization reform.Currently,in the post-financial crisis era,the global economic situation is extremely complex,the world economic growth downturn continuing."Anti-globalization" trend of thought and protectionism tending to rise,causing we worried about the market.In order to prevent the risks brought by the opening of capital account and to promote the development of China's economy and finance,this paper studied the relationship between capital account opening and exchange rate marketization.,through the combination of theoretical analysis and realistic analysis.About the empirical analysis,this paper established the VAR model.With the help ofGranger causality test,we found that there was a causal relationship between exchange rate marketization and the capital account opening.And we also found that there was a close relationship between the two reforms and variables,such as the price level and the domestic financial market developmental level,which reflect the institutional factors and developmental level.Then based on the impulse response analysis,it is found that the interaction between the vertical fluctuation of the exchange rate and the capital account opening is more significant than that of the change of exchange rate and capital account opening.Further more,the impact of exchange rate fluctuations on the capital accounts opening is greater than the reverse impact between the two.And exchange rate fluctuations have a positive impact on capital account opening.The empirical results show that the advancement of exchange rate marketization is conducive to the capital account opening.After that,we made the impulse response analysis between capital account opening and institutional factors.The results show that the improvement of the domestic financial market and the steady increase in the price level are conducive to the opening of the capital account,and the continuous opening of the capital account will impact on the financial market,affecting the stability of the price level.According to the results of this analysis,we found out the order arrangement of exchange rate marketization and capital account opening.With lack of developed exchange market and mature market participants,China is more appropriate to adopt a relatively flexible intermediate exchange rate system,trying to get the goal of free floating exchange rate through continuous improvement of financial markets.With analysis conclusion of rationality and feasibility,we found that the process of exchange rate marketization should be prior to the process of capital account opening.We should speed up the pace of exchange rate marketization on the premise of keeping capital control.The promoting of the capital account opening should meet the conditions that financial reform continues to advance,the financial market continues to improve and that the market mechanism is becoming more sophisticated.