Causes, Effects, and Risks of Short-Term Capital Flows.

Author: Li Chong
Publisher:
Publish Date: 2004-01-01
Features: The issue of short-term capital flows in financial markets is increasingly gaining attention. The author proposes a new definition of short-term capital flows in this book, identifies the causes of short-term capital flows that contribute to financial market investment advantages, systematically explains short-term capital flows, and analyzes their effects as well as methods to mitigate the risks of short-term capital flows.
Research on long-term capital flows, primarily in the form of direct investment, has been relatively comprehensive, leading to the development of various influential theories, such as Hymer's (S. H. Hymer) theory of monopolistic advantage, Vernon's (R. G. Vernon) product life cycle theory, Kojima's (Kiyoshi Kojima) theory of comparative advantage investment, Buckley's (B. J. Buckley) theory of market internalization, and Dunning's (J. H. Dunning) theory of international production. However, research on short-term capital flows remains insufficient.
If short-term capital flows are categorized for discussion, theories related to borrowing capital flows primarily include Einzig's (P. Einzig) interest rate parity theory and Grossman's (G. M. Grossman) international borrowing theory. Theories related to cross-border securities investment mainly include the two-country, two-asset model proposed by Eng (Maximo V. Eng), Lees (Francis A. Lees), and Mauer (Laurence J. Mauer). Theories related to currency speculation primarily include the three-generation speculative shock model proposed by Salant (S. Salant), Henderson (D. Henderson), and Krugman (P. Krugman).
This led me to the idea of comprehensively exploring the causes and effects of short-term capital flows. Building on the research in The Theory of National Financial Risk, after three years of study, I completed the writing of this book. If the book has any innovations, they primarily manifest in the following aspects: First, it proposes a new definition of short-term capital flows; Second, it identifies the causes of short-term capital flows that contribute to financial market investment advantages; Third, it systematically explains short-term capital flows; Fourth, it systematically analyzes the effects of short-term capital flows; Fifth, it proposes methods to mitigate the risks of short-term capital flows.