Study on Current Items Unbalance, Cross-border Capital Flow and Financial Fragility (ePub)

According to the traditional view, the international trade flow has always been considered as the main driving factor of the current items balance. According to this view, the researcher fully emphasizes the decisive effect of import and export trade balance on the country's international payments situation while analyzing the payments situation of one country's external account, and often neglects the great influence on other items under current items payments (such as net external assets income and cross-border wage payment and so on). However, under the promotion of financial globalization, the external assets net earnings have played a more and more important role in present global current items unbalance. Current items balance has a high sensitivity to the international financial assets return and the fluctuation of market interest rate, this is because, in a certain period, the real variables (such as international trade flows) change is relatively stable, while the financial variables (such as net external assets income) has obvious changes. In terms of empirical research, Tobin (Tobin, 2008) provided experience support for the above new features of current items by using the research results obtained from the panel data of 70 countries from 1970 to 2004. In this way, factors related to the financial aspects will play a prominent effect on the current items payments, net external assets accumulation is the final result of cross-border capital flow, some cross-border capital flows driven by rate of return will make current items payments become more unstable, the macroeconomic impact produced by both of them will further exacerbate the fragility of financial system.