Study On Macroeconomic Effects Of Foreign Exchange Reserves Accumulation In China

The foreign exchange reserve problem is an important problem in the field of international finance. The foreign exchange reserves in China are extensive and expanding by leaps and bounds, which is concerned by people. From Reform and Open, the quantity of our country's foreign exchange reserves is increasing by a wide margin. Especially from the deregulation of exchange rate in 1994, the trend of our country's foreign exchange reserves increasing is swift and violent. In 2006, the amount of our country's foreign exchange reserves is up to 1066.3 billions American dollar, and is the largest amount in the world. Therefore the scale and the macroeconomic effect of foreign exchange reserves are concerned by scholars.Building on the research achievements in foreign exchange reserves of scholars both at home and abroad, and combining qualitative analysis with quantitative analysis, and using econometrics research methods such as units testing, Johansen cointegration testing and Granger cause testing which embody the characteristic of time series data, the papers empirically study the macroeconomic effects of foreign exchange reserves in China. Firstly, this papers start with the development and the cause of foreign exchange reserves, and study the scale and the stage of foreign exchange reserves in China, and aid special stress on analysing the increase and the cause of foreign exchange reserves in China from 1994. Then, the papers establish and empirically analysis the econometrics model of macroeconomic effects of foreign exchange reserves which building on the impact model of macroeconomic effects of foreign exchange reserves and theoric analysis. Lastly, some policy suggetions in relation on the manage of foreign exchange reserves building the research conclusion have been expounded. There are principal conclusions.①From the deregulation of exchange rate in 1994, the large scale of foreign exchange reserves in China is the result of the macroeconomic and the regimentation of foreign trade and foreign exchange, which adapt to the development and reform of our country economic. But the increase of our foreign exchange reserves give rise to disadvantage effect to our industry structrue adjustment, and phenomena such as aggravate inflation, waste resource and so on.②Theorically, foreign exchange reserves affect and adjust macroeconomic each other. The variation of foreign exchange reserves will result in the variation of the supply of basis money in one country, and affect the money supply and the total demand of the society through money multiple, and exert macroeconomic effcet. At the same time, the macroeconomic effcet will ultimately impart the variation of the price and the rate of interest, and affect the international trade and the flow of international capital, and make furtherly effects on the variation of foreign exchange reserves.③Empirically, there exists the correlation of the rate of increase of money supply and the rate of increase of GDP, the logarithm of price index and the logarithm of index of foreign exchange reserves. The effect of increasing of foreign exchange reserves on the economic growth is not large as the effect of economic growth itself. The exo-effect of increasing of foreign exchange reserves on the money supply is minute. The index of price is affected by the relevance factor of domestic economic, and the increasing of foreign exchange reserves as a factor affect minute. The increasing of foreign exchange reserves is the result of import and export, and it is affected by exo-economic activity. And, the increasing of foreign exchange reserves in China is to be from international trade, not from FDI, which demonstrate that the stability and safety of foreign exchange reserves in China are better.④About the policy of policy of the manage of foreign exchange reserves, suggest the manager award the scale of foreign exchange reserves is congruence on the basis of the condition of domestic economic, not the amount of foreign exchange reserves. And emphasized establish the conduction mechanism of the effect of foreign exchange reserves to money supply furtherly to macroeconomics, therefore foreign exchange reserves and macroeconomics can affect smoothly each other.