The Impact of Capital Account Opening on RMB Internationalization

Abstract

At this stage, the internationalization of RMB is inseparable from the opening of capital account, and in this process, it is bound to face the challenge of systemic financial risks. Based on SV-TVP-VAR model, this paper makes a time variant analysis on the systemic financial transmission mechanism of capital account opening Affecting RMB internationalization. It is found that the opening of capital account promotes the development of RMB internationalization, and the international use of RMB will force the expansion of capital account opening. Further research shows that the current capital account is not easy to fully open, capital account convertibility intensifies the spillover of macroeconomic risks and external market risks, and macro prudential supervision needs to be improved. The restraint of capital account opening on monetary liquidity risk and asset bubble risk shows time varying characteristics, and the long-term development of RMB internationalization urgently needs to deepen the reform of financial system.