Yirong Ying

Systems Research and the Systemic Yoyo Model

To prepare the theoretical foundation for the rest of this book, this chapter introduces the basics of systems thinking, the systemic yoyo model, and some elementary properties of this model. Then, for the completeness of this book, this chapter also glances through the theoretical and empirical justifications on why each and every system can be seen as a rotational yoyo.

Unconscious, Helpless, and Orchestrated Financial Crises

This introductory chapter presents the current landscape of international finance in terms of financial crises by reviewing the relevant literature and by posting problems that are challenging the world of learning, central bankers, and government policy makers. By looking at the literature holistically, this chapter associates the concept of money with that of fluids through using the concept of systems and the systemic intuition, named yoyo model.

Another Plan of Self-Protection

This chapter, based on (Chen et al. 2017), investigates the following problem: how could a nation possibly design a measure to counter large-scale sudden flight of foreign investments in order to avoid the undesirable disastrous consequences? Continuing what were presented in Chap. 12 (Forrest et al. 2013a), and based on how a currency war could be potentially raged against a nation, all results herein are established by making use of the results of feedback systems. And based on theoretical reasoning and systemic analysis, this chapter develops a self-defense mechanism that could conceivably protect the nation under siege.

Self-Defense Based on Feedback Mechanism

This chapter studies the problem that when the control-theory model of an economic system is established with the parameters determined, how can one design the corresponding economic policy that is based on feedback of the system so that the performance indicator would approach the pre-determined objective. By identifying the “invisible hand” that adjusts the economic market automatically as the feedback controller that regulates the economy’s supply and demand, this chapter focuses on the design of feedback controls that could withstand disturbances of the environment. This chapter establishes a feedback control model for the economic system, provides proofs for how well this proposed control method could perform in practice, and expands this method to design the linear multivariable feedback control and the feedback control of discrete variables.

The Problem of Optimal Path for Financial Reform

This chapter studies the problem that when an emerging market economy attempts to emerge into the process of economic globalization and financial integration, how could it design a quickest path of financial reform in order to avoid potential crises and to minimize the disastrous aftermath of crises? All the results obtained herein are established by using methods of systems modeling and analyses of control theory.

Design Economic Policies that Do Not Create Bumpy Recovery

This chapter studies how to make sure when the economic performance indicators approach some pre-determined target values due to the effect of adopted policies, the economy also develops reasonably well without experiencing much severe up-and-down fluctuations. This problem of concern is resolved by addressing the corresponding problem of pole placement of the general control-theory model of the economic system. This chapter (1) discusses conditions under which the poles of a constant coefficient linear economic system can be arbitrarily placed, (2) provides a way to calculate the matrix of feedback gain that is useful in placing the poles by using the feedback control mechanism so that the resultant constant coefficient linear economic system possesses a good quality stability and fast response speed, and (3) investigates the problem of how to design state or output feedbacks (economic policies) so that the resultant closed-loop economic system will have the pre-determined poles. At the end, some open problems of great importance are posed for future research. This chapter relates the issue of economic policy making and the pole placement of the general control-theory model of the economic system. The results are expected to provide practically useful guidelines.

Design Economic Policies Based on Various Performance Indicators

This chapter investigates when a large amount of capital flows suddenly to or away from a particular economy and how the consequent economic shocks can be minimized by employing feedback controls while the desirable economic growth can still be on track. By employing the method of the state and/or output feedbacks of control theory, this chapter explores how to practically design mechanisms based on the concepts of state and/or output feedbacks. In particular, this chapter presents a method of designing economically stabilizing strategies when the economic system suffers from external shocks by employing output feedback and Lyapunov feedback control.

Steepest Optimal Policies for Regulating Capital Flows and Exchange Rates

This chapter investigates how an economic system should adjust its exchange rate and capital movement within the shortest time possible in order to reduce the disastrous aftermath of a financial crisis to the minimum. The main results of this chapter are produced by employing the logical thinking of general systems theory and the analytical manipulation of control-theory models.

Renminbi: A New Reserve Currency

This chapter focuses on the study of what China has done and might need to further do in order to make its Renminbi a successful reserve currency of the world. It consists of five sections. Section 20.1 attempts from three angles to analyze the following issues related to RMB offshore market: how cross-border flows of RMB impact the domestic economy, how the expected RMB appreciation/depreciation influences the development of the offshore market, and how the RMB offshore market lacks liquidity. It also tries to develop a design for the circulation mechanism between the offshore and onshore market while providing advices on how to promote positive interactions between the two. Section 20.2 theoretically considers how the development of RMB offshore market impacts China’s domestic base currency and foreign exchange reserves and analyzes the mechanism of interest rate and its influence factors based on the principle of logistics by using methods of differential dynamical systems. Section 20.3 investigates what offshore non-deliverable forward market data can tell about the prospect for further RMB appreciation, as well as the development of Chinese financial market since July 2005 when the band for RMB to fluctuate was widened, and how the continuing volatility of the US dollar against the Japanese yen affects the development.

Order Reduction of Dynamic Monetary Systems

This chapter develops a control-theory model for the movement of money within an economic system based on changes in purchasing power of a currency by analyzing how the purchasing power changes within the economic system, and it details with the problem of how our method of reducing the order of the original control-theory model can be utilized to obtain models of reduced order that resemble the original model while still processing such important properties as observability and controllability.