The Impact Of Short-term International Capital Outflow To Chinese Stock Market

Since 2003,the international short-term capital flows have been gradually promoted with the continuous recovery of the global economy.With the the process of free flowing of international capital,there are more and more international capital flowing into China.Especially when Chinese national strength becomes strong and RMB has appreciatied significantly after the exchange rate reform in 2005,there are more and more profitable short-term international capital flowing to the stock market in china.But from the middle of year 2014,this situationthe has been reversal.Because of the increasment of U.S.interest rate,the dollar has been appreciatied relative to other currencies.Under this situation,short-term international capital of China appeared outflow,which will influent the stock market of our country in a high degree.Therefore,under the background of strong dollar,this paper aims to study the impact of short-term capital outflows on China’s stock market shocks from theoretical and empirical aspects.The paper will regard the short-term international capital flowing as the starting point,introduce its’ definition and calculation methods firstly,and then introduce how the short-term international capital make impact on the stock market where includes three mechanism : interest rate,exchange rate,market driven investment speculation.In the empirical research,this paper will use VAR model to study the method of short-term capital flow to affect the price of a country’s stock market.On this basis,it will choose four representative industry in the stock market.And then,the paper will use pulse decomposition and Variance Decomposition to analyse.Finally,based on the recent international economic trend and empirical analysis,the paper will give some suggestions about how to sustain Chinese financial stability under the background of strong US dollar.