Capital Account Liberation
Methods and Applications
Systems Evaluation, Prediction, and Decision-Making Series

Along with the development of economic globalization, many countries have begun to relax their controls on their capital accounts. However, the recent financial crises in Latin American countries as well as the exchange rate crises in Southeast Asian countries have shown that there is major risk associated with capital account liberalization.

This book details the benefits and risks of capital account liberalization and explains how to take an open-door policy at the appropriate time in order to reduce the risk to the lowest possible level. Supplying a complete mathematical analysis framework for the study of the problem of capital account liberalization, it presents a few important models that have been developed for the study of capital account liberalization.

Next, the book examines the influence of capital account liberalization on the stability of financial markets by greatly expanding the scope of ordinary differential equation theory to the analysis of local stabilities. It conveys cutting-edge results while providing a general yet simple analysis framework, enriched with practical experiences from developing countries.

This book applies the theory of limit cycles to the study of problems related to capital account liberalization and discusses the contagion of financial crises among different countries. Many problems related to capital account liberalization are formulated as optimization models, showing the fact that much broader economic issues can be solved by employing optimization methods.

The book concludes by comparing the contagion effect of financial markets between nations with a relatively high degree of openness with those characterized by a moderate degree of openness. Explaining how to determine optimal capital inflows and outflows, this book provides you with the understanding required to accurately determine the characteristics, backgrounds, causes, and roles of capital account liberalization and relevant capital flows.

From Theory to Visualization: General Analysis Framework in Finance. From Micheal to Heckscher–Ohlin: ODE for Capital Account Liberation. From European to Asian Option: PDE for Capital Account Liberation. From Financial Crises to Currency Substitution: Limit Cycle Theory for Capital Account Liberation. From Normal to Abnormal Flow of Capital: Optimizations for Capital Account Liberation. Optimization Models in Finance. From Underground Economics to Financial Contagion: Regressions for Capital Account Liberation.

Ying Yirong is professor of finance and is associate chair of the Department of Finance, College of Economics, Shanghai University, Shanghai, China. He earned his BSc in mathematics in 1982 from the Mathematics Department of Northwest University (China) and his PhD in mathematics in 2000 from the Mathematics Department of Xidian University. In 2002, Dr. Yirong did one year of postdoctoral study at the Institute of Contemporary Finance, Shanghai Jiao-Tong University.

Professor Yirong has taught many different courses in the areas of economics and finance, such as econometrics, financial economics, financial physics, applied statistics, financial engineering, economic cybernetics, and low carbon economy. His research interests include financial engineering, financial mathematics, securities pricing, and risk management.

Jeffrey Yi-Lin Forrest holds all his educational degrees (BSc, MS, and PhD) in pure mathematics, respectively, from Northwest University (China), Auburn University (United States), and Carnegie Mellon University (United States), where he has one-year postdoctoral experience in statistics. Currently, he is a guest or specially appointed professor in economics, finance, systems science, and mathematics at several major universities in China, including Huazhong University of Science and Technology, the National University of Defense Technology, and Nanjing University of Aeronautics and Astronautics, and a tenured professor of mathematics at the Pennsylvania State System of Higher Education (Slippery Rock campus). Since 1993, Dr. Forrest has been serving as the president of the International Institute for General Systems Studies, Inc. Along with various professional endeavors he has organized, Dr. Forrest has had the honor to mobilize scholars from more than 80 countries representing more than 50 different scientific disciplines.