Economic Security under Disturbances of Foreign Capital

Abstract

Considering spillover effects of foreign capital, this paper establishes a method for the receiving economy to constantly monitor and forecast the movement of foreign capital within itself so that methods of regulation could be established to guarantee the health and stable development (or the security) of the domestic economy. Methods of control theory are employed to model the movement of foreign capital, to estimate the initial state of foreign capital’s movement. On the method established and the systemic yoyo model, this paper introduces ways to prevent foreign capital from adversely impacting the receiving economy for establishing theoretical guidance for insuring the healthy development of the economy. This paper provides several practically useful strategies that could counter disturbances caused by foreign capital within the receiving economy and protect the economic security of the system in order to avoid the disastrous aftermath of the currency war that occurs along with large scale withdraw of foreign capital that was initially invested within the system in friendly terms.