Research On The Measurement Method Of The Moderate Scale Of Foreign Exchange Reserves In China

Moderate scale of Foreign Exchange Reserves (FER) is one of the most important problems of the correlative researches of foreign exchange reserves. The research of China's moderate scale of foreign exchange reserves will redound to solving the management and regulation of foreign exchange reserves in practice and making use of foreign exchange reserves in reason. At present, there are many researches on the scale of foreign exchange reserves through different way studying the moderate scale of the foreign exchange reserves, and formed different methods: demand regress function method, rule of three, opportunity cost theory, etc. The opportunity cost theory that is distinguished by Agarwal model is one of the research mainstreams. The current cost-return method that is used for moderate scale of foreign exchange reserves has improved a lot from the Agarwal model. But the method that plus some variables at the base of Agarwal model doesn't analyze the cost and return of foreign exchange reserves radically. So strictly speaking it can't be called cost-return method.According as the upper limit restriction (basic demand) and the floor level restriction (cost and return) of the foreign exchange reserves, the paper constructs basic reserves demand model and the tiptop reserves model of foreign exchange reserves in China on the basis of demand motivation and cost-return theory of foreign exchange reserves. Concretely the paper consists of five parts. The preface part expatiates the structure of the paper after reviewing the related the optimal scale theories of foreign exchange reserves. Chapter two defines the moderate scale of foreign exchange reserves and analyzes the demand motivation of foreign exchange reserves. On the basis of that, the paper makes supply-demand analysis and constructs basic demand model of foreign exchange reserves in China. Chapter three of the paper makes cost-return analysis and sets up a quantitative model of cost-return on the basis of other people's researches. The paper educes the upper limit of the scale under the restriction of the cost and return. Combined with the result of chapter two, the moderate scale of foreign exchange reserves is confirmed. Chapter 4 of the paper carries on the demonstration analysis to the model set up in chapter two and chapter three. The paper computes the moderate scale of China's foreign exchange reserves in the past years (1994-2004) through the model educed in chapter 3, and analyzes the real scale of foreign exchange reserves in China on the basis of computing result. Chapter five is the conclusion of the paper, which recapitulates the research result and gives out the deficiency and deeper research direction.The result of the theoretic research and the models indicate that the moderate scale of foreign exchange reserves are related of many factors, such as economic scale, degree of opening, scale and structure of foreign capital, difference of investment benefit between inside and outside. After analyzing the result of demonstration, it's found that the real scale of foreign exchange reserves in the year of 1994-2002 is reasonable, and the increase speed is not fast. But the scale of foreign exchange reserves goes beyond the reasonable scale after 2003. Moreover, the structure of moderate scale indicates that the proportion of debt-repay demand is very high. So it means a majority of the foreign exchange reserves of our country is indebtedness reserves. Consequently the structure of the foreign exchange reserves is unreasonable and need to be managed and regulated more.