scholarly journals How Does Capital Account Liberalization Affect Systemic Financial Risks? Evidence from China

2021 ◽  
Vol 2021 ◽  
pp. 1-13
Author(s):  
Zhiyong Zheng ◽  
Jian He ◽  
Yang Bian ◽  
Chen Feng ◽  
Mengting Zhang
Keyword(s):  
Financial Risk ◽  
Capital Inflows ◽  
Credit Crunch ◽  
Capital Account ◽  
Financial Risks ◽  
Time Varying ◽  
Structural Vector Autoregression ◽  
Capital Account Liberalization ◽  
Macroeconomic Risk ◽  
Short Run

Capital account liberalization typically results in higher volumes of capital inflows and outflows for a country, yet abnormal cross-border capital flows may lead to overall financial risk accumulation, in turn causing tremendous damages to the economy. Using a time-varying parameter structural vector autoregression model with stochastic volatility (SV-TVP-SVAR), we identify time-varying effects of capital account liberalization on four types of systemic financial risks in China. Empirical results demonstrate that capital account liberalization, in the short run, can effectively curb the accumulation of macroeconomic and sudden stop risks. On the other hand, capital account liberalization may heighten credit crunch and asset bubble risks to varying degrees. We also find that some important capital account liberalization measures are double-edged: reform policies are likely to increase macroeconomic risk when optimizing the financing structure and reducing credit crunch risk.

The political economy of financial internationalization in the developing world

1996 ◽  
Vol 50 (1) ◽  
pp. 35-68 ◽  
Author(s):  
Stephan Haggard ◽  
Sylvia Maxfield
Keyword(s):  
Developing Countries ◽  
Balance Of Payments ◽  
Capital Inflows ◽  
Financial Intermediaries ◽  
Capital Account ◽  
Financial Openness ◽  
Capital Account Liberalization ◽  
Proximate Cause ◽  
The Face ◽  
Financial Internationalization

In the last decade a growing number of developing countries have opened their financial systems by liberalizing capital flows and the rules governing the international operations of financial intermediaries. One explanation of this rush toward greater financial internationalization is that increasing interdependence generates domestic and foreign political pressures for capital account liberalization. While we find evidence for that hypothesis, we find that the proximate cause in developing countries more frequently is found in balance of payments crises. Politicians perceive that financial openness in the face of crisis can increase capital inflows by indicating to foreign investors that they will be able to liquidate their investments and by signaling government intentions to maintain fiscal and monetary discipline. The argument is explored through case studies of Chile, Indonesia, Mexico, and South Korea.

Lessons from East Asia

1998 ◽  
Vol 23 (4) ◽  
pp. 3-10
Author(s):  
C Rangarajan
Keyword(s):  
Financial Crisis ◽  
East Asia ◽  
Supervisory Control ◽  
East Asian ◽  
Financial System ◽  
Recipient Country ◽  
Asian Financial Crisis ◽  
Capital Inflows ◽  
Capital Account ◽  
Capital Account Liberalization

A year has passed since the onset of the Asian financial crisis. We are not sure that we have seen the final act of the drama. The East Asian experience shows that if there is an open capital account, the recipient country must have a stricter system of monitoring the inflows. A supervisory control over the financial system must also be very stringent. A loose domestic financial system and large capital inflows are the worst combination. It invites danger. According to Rangarajan⁄ the lesson to draw from the East Asian crisis is that the capital account liberalization and reform of the financial system should move in tandem.

scholarly journals A Pragmatic Approach to Capital Account Liberalization

2008 ◽  
Vol 22 (3) ◽  
pp. 149-172 ◽  
Author(s):  
Eswar S Prasad ◽  
Raghuram G Rajan
Keyword(s):  
Capital Inflows ◽  
Capital Account ◽  
Costs And Benefits ◽  
Pragmatic Approach ◽  
Capital Account Liberalization ◽  
Indirect Benefits ◽  
Essential Step ◽  
Flow Of Funds ◽  
Economics Profession ◽  
Capital Outflows

In the mid-1990s, mainstream economists of nearly all stripes commonly recommended capital account liberalization—that is, allowing a free flow of funds in and out of a country's economy—as an essential step in the process of economic development. But then came the East Asian financial crisis of 1997–98, in which even seemingly healthy and well-managed economies like those of South Korea were engulfed by massive capital outflows and tremendous currency volatility, and capital account liberalization became quite controversial in the economics profession. A decade later, now that time has quelled passions and intervening research can shed more light on the debate, it appears that both the costs and benefits of capital account liberalization may have been misunderstood in that earlier debate. Now it appears that the main benefits of capital account liberalization for emerging markets are indirect, more related to their role in building other institutions than to the increased financing provided by capital inflows. And these indirect benefits are important enough that countries should look for creative approaches to capital account liberalization that would help attain these benefits while reducing the risks. Countries don't have much choice but to plan for capital account liberalization because capital accounts are de facto becoming more open over time, whatever governments may do to try to control them.

Time-varying Macroeconomic Risk of Real Estate Returns

2016 ◽  
Author(s):  
Felix Schindler ◽  
Bertram Steininger ◽  
Tim Kroencke
Keyword(s):  
Real Estate ◽  
Time Varying ◽  
Macroeconomic Risk ◽  
Real Estate Returns

Financial Risks of the Bank: Assessment and Mechanism of Neutralization

2020 ◽  
Vol 22 (1) ◽  
pp. 6-12
Author(s):  
Nelia Volkova ◽  
◽  
Alina Mukhina ◽  
Keyword(s):  
Risk Assessment ◽  
Financial Stability ◽  
Financial Risk ◽  
Stable Operation ◽  
Financial Risks ◽  
Negative Consequences ◽  
Conceptual Approach ◽  
Relevant Today ◽  
Banking Institution ◽  
The Impact

Abstract. Introduction. The issue of financial risk management of commercial banks is quite relevant today, because the activity of banks is the most risky of all. The presence of risks in banking can lead to unexpected losses, namely the loss of own resources. That’s why for the stable operation of the bank without loss the priority is to assess the financial risks, which is the basis for their further neutralization. Purpose. The purpose of the article is to develop conceptual provisions for assessment financial risks and justifying the need to neutralize them. Results. The article analyzes the impact of risks on the financial stability of a banking institution. The main methods of bank risk assessment are considered. All these include the statistical method, the analytical method, the expert method, the analogue method and the combined method. The necessity of neutralization of financial risks in order to avoid negative consequences is substantiated. Also the methods of bank risks neutralization are considered. It should be noted that these methods of neutralization can not only be used, but also supplement the list with new methods must be done, which in the future will protect the bank from the influence of undesirable factors. A conceptual approach to the assessment and neutralization of financial risks is proposed. This conceptual approach aims to ensure effective assessment of the level of risk with their subsequent neutralization Conclusions. Use of a conceptual approach will allow an effective risk assessment and decision-making to avoid or accept risk. Thanks to using this approach, the banking institution will be able to react swiftly to the presence of financial risks and to prevent the occurrence of negative consequences, which may lead to a violation of the financial stability of the bank.

FINANCIAL RISK MANAGEMENT IN ENTREPRENEURIAL ACTIVITY: CONCEPT, SYSTEM AND PRINCIPLE OF BUILDING

2020 ◽  
Vol 2 (4) ◽  
pp. 62-67
Author(s):  
M. M. KHAYTANOVA ◽  
Keyword(s):  
Risk Management ◽  
Financial Risk ◽  
Entrepreneurial Activity ◽  
Financial Risks ◽  
Study Methods ◽  
Financial Risk Management ◽  
Concept System

The article reveals: theoretical justifications of the concept of “financial risk” in relation to the sphere of entrepreneurship; methods for its identification and processing. Financial risk management is the activity of identification, assessment, control and monitoring of risks. In the course of the study, methods for managing financial risks in entrepreneurial activity and their classification were identified.

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