Related Analysis Of China's Foreign Exchange Reserves Based On Nonparametric Regression Method

China's foreign exchange reserves were less than 1 billion dollars each year before the opening of reform, they were even negative in some years. After the opening of reform. China's foreign exchange reserves appeared to grow rapidly, it's scale expanded and even reached the point of leap growth. In 2006, the foreign exchange reserves in China realized the breakthrough and exceeded the trillions dollars, therefore, China became the country with the largest foreign exchange reserves. By 2013, China's foreign exchange reserves had reached 3.821315 trillion dollars and had excessively been more than moderate levels of the foreign exchange reserves. These huge foreign exchange reserves has brought an influence on China, such as promotion of the residents' consumption, further pushing up prices and production of the inflation pressure.Foreign exchange reserves show a country's economic power, ensure the balance between the internal and external economy, and affect the magnitude of finance. In China, foreign exchange reserves not only offer a series of advantages, but also bring huge challenges to economic regulation. In order to maintain the stability of the exchange rate, the central bank increases the based money supply, which results in the increase of the total retail sales for social consumer goods. Huge foreign exchange reserves also can affect the monetary policy and cause the appreciation of the RMB, so that real value of the foreign exchange reserves will break down. Therefore, the research on relationships between foreign exchange reserves and money supply, and between foreign exchange reserves and total retail sales of social consumer goods has very important theoretical and realistic significance.Based on the nonparametric regression method, such as kernel regression, local polynomial regression and parametric polynomial regression method, this paper focuses on the researches on relation between China foreign exchange reserves and the circulation of the cash supply, and relation between China foreign exchange reserves and the total retail sales of social consumer goods. Three following conclusions are obtained in this paper. Firstly, for the study of the relationship between China's foreign exchange reserves and other variables, the performance of nonparametric model is better than parametric model. Secondly, in different period, China's foreign exchange reserves have different effects on the money supply and total retail sales of social consumer goods. Finally, China's foreign exchange reserves significantly beyond the normal level at present, so the decline of foreign exchange reserves has became an inevitable trend.