The Effect Of Capital Account Liberalization On The Fluctuation Of Economic Growth

Since the 1980s,influenced by economic globalization and liberalism,the wave of capital account liberalization has swept the world.Both developed and developing countries have actively opened capital accounts to achieve economic growth.China is as the largest developing country,China's direction of reform in the future will and the direction of future reform must be more and more open.However,theoretically speaking,capital account liberalization is bound to have an impact on the national economy.In this context,it is of great practical significance to study the impact of capital account liberalization on economic growth fluctuations.First,we calculate the opening degree of capital account,using nominal method and practical methods respectively.Nominal method also has two measures kinds of measurement standards,namely,Chinn-Ito index and FKRSU index;In fact,there are two kinds of measurement methods,namely,the proportion method and interest rate parity method.It is found that the opening degree of capital account in most countries is getting higher and higher becoming more and more open.Secondly,this paper studies the effect of capital account liberalization on economic fluctuation through using the annual panel data of 85 sample countries(including 48 low-income countries and 37 high-income countries)from 1995 to 2015,and finds that there is an inverted U-shaped relationship between the degree of capital account liberalization and the fluctuation of economic growth,and the opening degree of capital account at the inflection point is around 1.8 calculating with the proportion method and the inflection point is in proportion.Measure near Kaopen=1.8.When the opening degree of capital account is less than 1.8,the greater the opening degree,the greater the fluctuation of economic growth,that is to say,the opening of capital account will cause fluctuation of economic growth;when the opening degree of capital account is greater than 1.8,the fluctuation of economic growth will be suppressed.Thirdly,through descriptive statistics on the degree of capital account openness,it is found that the degree of capital account openness of the middle-income countries is more on the left side of the inflection point,and that of the high-income countries is more on the right side of the inflection point.Therefore,we distinguish low-income countries from and high-income countries are distinguished to study the heterogeneity of the fluctuation effect of capital account openness on the economic growth of sub-sample countries.The results show that capital account liberalization can promote economic growth volatility in low-and middle-income countries,but has no significant impact on economic growth fluctuation in high-income countries,thus verifying the establishment of the inverted U-shaped relationship.In addition,this paper studies the effects of three different types of capital account liberalization on the fluctuations of economic growth in countries with different income levels,and also finds the heterogeneous effects on the fluctuations of economic growth in countries with different income levels.Specifically,direct investment promotes the fluctuation of international economic growth in middle-and low-income countries,and suppresses the fluctuation of economic growth in high-income countries;other investment promotes the fluctuation of economic growth in high-income countries.Therefore,direct investment is the most important factor that leads to the fluctuation of economic growth in low-and middle-income countries among the three subdivisions of capital accounts subdivisions of capital accounts;the cross-effects of direct investment and other investments on the fluctuation of economic growth in high-income countries lead to that the overall opening level of capital account overall level of capital account openness has no significant impact on the fluctuation of economic growth in high-income countries.Subdividing The different effects of subdivided capital account liberalization on economic growth fluctuations in different income countries with different income level verifies verify the heterogeneity effect of capital account liberalization on economic growth fluctuations in different income countries,and further confirming the inverted U-shaped relationship.Finally,this paper studies the quarterly time series data of China from 1998 to 2017,and establishes a structural vector autoregressive model is established.It is found that the effects of capital account and three kinds of subdivided capital account of China on economic growth fluctuation are in line with the previous effect of low-income country.The fluctuation of economic growth in income countries reflects the opening of capital account.Considering the international experience and China's facts of the fluctuation effect of capital account liberation,China's overall capital account opening level is on the left side of the "inverted U" inflection point at this stage,capital account liberation,especially the opening-of direct investment,will promote the fluctuation of China's economic growth.This paper suggests that developing countries,including China,should pay more attention to capital account liberalization,especially the risk effects brought about by the opening up of direct investment.We should actively guide foreign investment in industries with comparative advantages,pay attention to technological progress,industrial structure upgrading,and properly slow down the process of other investment openness.