The Impact Of China's Foreign Exchange Reserves On Price Levels And Empirical Research

After joining the WTO,China's economy entered a golden age of economic growth.with the comparative advantage of low-cost basis,in China's economic growth,the formation of relying on exports for economic growth of export-oriented economic structure.Thus,in the balance of payments surplus consecutive double,but the amount of foreign exchange reserves continue to grow.In order to stabilize the exchange rate,to achieve a stable managed floating exchange rate,China's central bank continues to buy foreign currency in the foreign exchange market,a lot of liquidity the yuan has been put in.In recent years,foreign exchange reserves from the published data,the amount of foreign exchange reserves held by China has nearly $ 4trillion in scale,if we can not properly coordinate such a large foreign exchange reserves,we will cannot control the relationship between the central bank need to formulate and implement monetary policy,there will no doubt that it will make the RMB against the US dollar price,the domestic price level,financial markets and other markets have adverse effects,thereby,it may affect the healthy and stable economic development.Especially nowadays,our government is actively promoting financial reform: As RMB internationalization,capital account liberalization and exchange rate reform,foreign exchange reserves need to pay more attention to the role of a buffer or the changes.As the economy continues to grow,continuous development of society,the government's macroeconomic policy is gradually maturing.China's exports,foreign exchange reserves,the narrow money,the interaction within them of the price level will change.From export and foreign exchange reserves,the narrow money,the price level,we can find a long-term presence of interaction effects.By using monthly data from 2002 to 2015 by VAR model,cointegration analysis,Granger causality test,impulse response function and the empirical results of variance decomposition,obtained during internal affect the results.And by staging tests,segmentation modeling,combined with the status prevailing macroeconomic,comparison against the influence of change reasons.Result of changes in the price level elements:the imbalance between supply and demand,production costs superimposed industrial structural contradiction,instability in the macroeconomic policy,market-oriented reform is not complete and so on.Finally,the policy recommendations in this paper :First,reform and improve the exchange rate regime.Second,relaxing the principle of using foreign exchange reserves.Third,to improve the function of market,and government.Fourth,improve expecting of the market.Fifth,relying on monetary policy anchor,reduce the impact of foreign exchange reserves on the price level.Sixth,pay attention to the use of fiscal policy on the adjustment of economic structure.