Study On The Influence Of Cross-border Capital Flows On Exchange Market Pressure Of Emerging Markets

With the deepening of financial liberalization,capital exchanges have become increasingly close between emerging markets and other countries.At the same time,the capital flows of emerging markets are vulnerable to the impact of the international financial environment,resulting in the appreciation or depreciation of the local currency and interfering with domestic financial stability.Therefore,this paper uses an indicator called the Exchange Market Pressure(EMP)to comprehensively measure the pressure of currency appreciation or depreciation.The purpose of this paper is to explore the effects of cross-border capital flows of emerging markets on their EMP,thus discovering the capital type and flow direction that have greater impacts,and providing guidance for the government to take control measures.After defining the emerging market countries and other concepts,this paper theoretically explores the impact mechanism of three types of capital flows,containing direct investment,securities investment and international credit,on the EMP,and finds that capital inflow mainly triggers the appreciation pressure of the foreign exchange market,while capital outflow mainly causes the depreciation pressure.This paper selects the quarterly data from 2000 to 2017 to explore the trends of the three types of cross-border capital flows and the EMP of emerging markets,and shows that these changes are closely related to several international financial events.In the empirical research,this paper selects the quarterly data from 2003 to 2017,by constructing a dynamic panel model,studies the different effects of net flow,inflow and outflow of three types of cross-border capital in emerging markets on the EMP,and further divides the sample time into four stages to do the regression.The main conclusions are as follows: first,in terms of maturity,short-term capital(securities investment and international credit)flows in emerging markets have greater influence on EMP than long-term capital(direct investment)flows.Second,from the perspective of the flow direction,the impacts of securities investment inflows and international credit outflows are most significant.Third,compared with pre-crisis stage,cross-border capital flows have more severe impacts on the EMP in the crisis stage,the QE implementation stage and the QE reduction stage.Based on theoretical and empirical results,this paper proposes several suggestions on cross-border capital flow management of emerging markets from different perspectives,including orderly advancing the capital account opening process,strengthening the management of short-term cross-border capital flows and dealing with the changes of international financial environment in all aspects.