Foreign Exchange Reserves Of The Optimal Control Theory Model

Foreign exchange reserve is an important macroeconcziiic index reflect- ing the change of one country international payments, its function of macroeconcrnic regulation is growing increasingly , but current theories about foreign exchange reserve lack of deeply researching on the ccxnplicated relations between foreign exchange reserve and macroeconcrnic variables and in practice many countries administration of foreign exchange reserve takes basically negative attitude to the management of foreign exchange re- serve; therefore, it has very urgent theoretical and realistic meaning to ex- plore the macroeconomic efficiency and the macroeconomic regulation mech- anism of foreign exchange reserve. In open economy, foreign exchange reserve is usually used to observe one country external econcrnic relations, it the result of macroeconomic operation and the useful means for regulating macroeconomic as well. Al- though foreign exchange reserve is just one accumulative anunt on some time point, it has close link with various aspects of a country macroeco- name. We can see the operation status of one country macroeconomic by observing the change of its foreign exchange reserve and it helpful for a country to realize the internal and external equilibrium of its economy or oth- er expected macroeconomic aims by adjusting the level of foreign exchange reserve. The key problems which need be solved with theories on foreign ex- change reserve are the most suitable size and the optimal control of foreign exchange reserve. It true that the economic development will be impacted to some extent when there is lack of foreign exchange reserve for a country, but the thinking that more foreign exchange reserve one country has, better it is, is not correct. Actually the foreign exchange reserve should be suitable to one country economic status, overfull foreign exchange reserve may also bring negative influence on economic development. There is still no widely acceptable standard of how on earth to determine one country really needful amount for foreign exchange reserve, however the key to this problem is how to judge its suitability. There are three standards which are usually used to judge the suitability of foreign exchange reserve, i. e. the first is the capa- bility of foreign exchange reserve offsetting international payment deficit, the second is the comparison between cost and earning holding foreign exchange reserve, the third is whether to prcrnote econcrnic growth to the largest ex- tent. I am inclined to support the last standard and think that under the con- dition of the existing resource, foreign exchange reserve should be adjusted to such a size in which this country econcxnic growth will be maximum. It just the theme which will be further and deeply discussed in this disserta- tion. he main clew of this dissertation is that the rationality and suitability of foreign exchange reserve will be judged in the circumstance of the whole macroeconomic and under the precondition of one country internal and ex- ternal econcmic equilibrium as well as other macroeconomic goals being con- sidered fully, therefore the research method is not isolated, nor Static, but comprehensive and dynamic. In other vwrds, besides the status of interna- tional payments, the ccmnparison between cost and earning holding foreign exchange reserve~ or the amount fluctuating frequently, the key to judging whether the size of one country foreign exchange reserve is suitable de-...