Research On The Influence Of Funds Outstanding For Foreign Exchange On Monetary Base In China

Monetary Base caused by the expansion of Funds outstanding for foreign exchange is growing rapidly accompanied by the total amount of China's economic growing rapidly after the foreign exchange management reform in 1994. At the end of December 2008, China's Funds outstanding for foreign exchange was 16843.11 billion yuan, which achieved the highest level in history, and the ratio of Funds outstanding for foreign exchange against Monetary Base rose to 130.34%. The expansion of Monetary Base due to the expansion of Funds outstanding for foreign exchange had a significant impact on the stability of the currency market and the implementation capacity of monetary policy, and brought about the central bank stress of sterilizing operation. Analysis the transmission mechanism and Influence of Monetary Base caused by Funds outstanding for foreign exchange, and to seek a reasonable response is the purpose of this research.The main line for the study is the impact of Funds outstanding for foreign exchange on the supply of Monetary Base, from both theoretical and empirical analysis to explain it and then to analyze its impact on the currency market and to make relevant policy recommendations. The full text consist of six parts, they are:The first part is the introduction, including the purpose, the significance, literature review in China and abroad, the content, the methods and the innovations.The second part discusses the basic problem of Funds outstanding for foreign exchange from the history of China's Funds outstanding for foreign exchange, the situation of China's Funds outstanding for foreign exchange and the characteristics of China's Funds outstanding for foreign exchange.The third part is the theory part, firstly analyze the connotation and derivation of Monetary Base, and then build the theory framework from transmission mechanism and impact, at last explain the control mechanism of Monetary Base and Funds outstanding for foreign exchange.The fourth part is the empirical analysis, selecting quarterly data from 1997 to 2008 to make empirical analysis, and the conclusion is: either from the long term or short term, the Funds outstanding for foreign exchange has positive impact on Monetary Base.The fifth part is the impact of China's currency market of the expansion of Monetary Base due to the expansion of Funds outstanding for foreign exchange, it consists of three parts: the structural changes of the currency and the inflation effect, the impact on maintaining stability of the RMB currency, the influence on the independence of central bank.The sixth part is the solution of the expansion of Monetary Base due to the expansion of Funds outstanding for foreign exchange, the sterilizing operation is the main measure to solve the problem in the short term, and improving the formation mechanism of foreign exchange, building up multi-level foreign exchange management system is the way to deal with the problem in long tem.