The Nonlinear Effect Of Capital Account Opening On Currency Internationalization

The influence of the capital account opening on the internationalization of money has been one of the hot issues in the research of international monetary and finance.After the collapse of the Bretton Woods system,the major international currency issuers(regions)have liberalized their capital controls to boost the internationalization of the local currency,but the opening of the capital account has the opposite effect on the international status of the major currencies,and thus,The "double-edged sword" effect of the opening of the capital account on the internationalization of the currency is of great concern to the academic and becomes one of the focal points of the debate.From the perspective of institutional environment,this paper discusses the mechanism of the effect of the opening of the capital account on the internationalization of the currency,and the role of the institutional environment,and selects the relevant data of the dollar,the euro,the yen,the pound and the Swiss franc as the sample.The paper studies the non-linear effect of the opening of capital account and its subprojects on the internationalization of money.This study has important theoretical and practical significance for the Chinese government to coordinate the policy formulation of capital account opening and RMB internationalization,which institutional environment needs to be strengthened,capital account opening is advancing and the process of RMB internationalization is deepening.The research work and conclusions are as follows:The first chapter is the introduction.This paper mainly expounds the research background and significance of this paper,and puts forward the thought and method of the article on the basis of combing and reviewing the influence of the capital account and its subproject opening on the internationalization of the currency,the influence of the institutional environment on the internationalization of the currency,as well as the innovation and insufficiency of the research.The second chapter is related theory and influence mechanism.Firstly,the relevant theories related to this research are summarized,including monetary search theory,network externality and conversion cost theory,money holding cost and income theory.Secondly,the influence mechanism of the opening of the capital account on the internationalization of the currency and the effect of the institutional environment are analyzed theoretically.The result shows that the opening of capital account can not only promote the process of currency internationalization through a series of channels such as cost reduction,but also can impact the macro-economic and financial stability,which is not conducive to the promotion of the internationalization of the currency.The improvement of the institutional environment can not only enhance the opening of the capital account to the promotion effect of the currency internationalization,but also reduce the blocking effect of the opening of the capital account on the internationalization of the currency.The third chapter is the status and association of the currency internationalization and the opening of the capital account.First of all,this paper examines the current situation of the internationalization of five major currencies:the dollar,the euro,the yen,the pound sterling and the Swiss franc.Secondly,it calculates and analyses the overall openness of capital account of international currency issuers,as well as the openness of various sub-projects,namely,direct investment,securities investment and financial derivatives investment.In the end,the relationship between the internationalization of the currency and the opening of the capital account is further analyzed in the view of the institutional environment.The results show that,when the institutional environment of the international currency issuing country is better,the degree of internationalization of the currency is positively related to the opening degree of the capital account,and the degree of internationalization of the currency is negatively correlated with the opening degree of the capital account when the institutional environment quality is poor.The fourth chapter is the non-linear effect of the opening of the capital account on the internationalization of the currency in the view of the institutional environment.In this chapter,through the construction of the panel smooth transition regression(PSTR)model,the influence of the opening of the capital account on the internationalization of the currency is studied by using the institutional environment as the conversion variable,and the robustness test is carried out by using the measurement index of the replacement correlation variable and the System Generalized Method of Moment estimation(SGMM).The results show that the opening of the capital account has a non-linear effect on the internationalization of the currency,that is the degree and direction of the opening of the capital account of a country to its currency internationalization is related to the institutional environment,and when the institutional environment quality is poor,The opening of the capital account has a significant negative effect on the internationalization of the currency,but with the rising of the level of the institutional environment,the negative influence of the opening of the capital account on the internationalization of the currency is gradually weakened,and when the level of the institutional environment is higher than the threshold level,The influence of the opening of the capital account on the internationalization of the currency is positive.The results of the robustness test show that the conclusion is robust.The fifth chapter is the non-linear effect of the different subprojects of the capital account and the opening of different flows to the currency internationalization under the institutional environment.This chapter continues the thinking of the fourth chapter,and uses the PSTR model to empirically study the impact of capital account sub-projects on currency internationalization,namely,direct investment,securities investment and financial derivatives investment openness,and the inflow and outflow openness of sub-projects.As a result,there is a signi ficant non-linear effect of all subprojects of capital account and their flow direction to currency internationalization,that is,with the continuous improvement of the institutional environment,the influence coefficient of each sub-item and its flow opening on currency internationalization changes from negative to positive.However,different subprojects and the opening of the flow direction of each sub-project have the obvious heterogeneity of the institutional environment threshold value required by the promotion of the internationalization of the currency,the threshold value of the direct investment opening is the minimum,the investment of the securities is the second,and the threshold value of the investment of the financial derivatives is the highest;At the same time,the value of the institutional environment threshold for each sub-project to relax the inflow control is lower than the threshold value of the relaxation and outflow control.In this way,it can be determined that the opening order of each subproject of the capital account is as follows:the direct investment opening takes precedence over the opening of the securities investment,the investment of the financial derivatives should be more cautious,and the control should be finally released;in addition,the flow of each sub-project should be followed by the inflow prior to the outflow.The sixth chapter is the conclusion and enlightenment.On the basis of the conclusion of the full-text research,this chapter puts forward the enlightenment of opening process of China's coordination and promoting the internationalization of the RMB and the opening of the capital account,as well as further improving the construction of the domestic system.The innovation point of this paper is embodied in three aspects:first,the non-linear effect of the opening of the capital account on the internationalization of the money is studied from the theoretical and the empirical aspects based on the new perspective of the institutional environment.Second,the capital account is further subdivided,and the non-linear effects of different subprojects and their different flow directions on the internationalization of the currency and the difference of this effect are studied.At the same time,the opening order of the capital account is deduced according to the threshold value of the institutional environment required by each subproject and its flow direction.Third,based on the empirical study of the PSTR model,the endogenous problem in the model is fully considered,and the System Generalized Moment estimation(SGMM)method is used to further test the model.