The Influence Of RMB's Entry Into SDR Currency Basket On Foreign Exchange Reserve Portfolio

Foreign exchange reserve is an important indicator of a country's foreign economic relations,it is not only the embodiment of macroeconomic results,but also an important means of macroeconomic regulation and control.The theory of foreign exchange reserve management has become one of the most important areas of international financial research.SDR is created because of its advantages such as steady and easy regulation as the world's reserve currency by the International Monetary Fund and assigned to each member country as supplement reserve assets to international reserve assets.But because there are some defects in innate,SDR has not been popularized.As RMB's entry into SDR basket will greatly enhance SDR's neutrality and representativeness as a world currency,and thus plays an important role in optimizing the structure of foreign exchange reserves.With RMB's entry into SDR basket,it is of great significance to study the influence of RMB's entry into SDR basket on the optimalization of foreign exchange reserve assets.In this paper,through combing the literature of SDR and the foreign exchange reserve asset allocation,we firstly introduce the related theory of foreign exchange reserves portfolio briefly,and then analyze the impact of RMB's entry into SDR basket especially the impact on foreign exchange reserve assets,and on this basis,we do the empirical research to assure the effect of RMB's entry into SDR basket on our foreign exchange reserve currency reserve assets.In the empirical research,we use the interest rate data of five kinds of currency during 1999-2016,and select the planning model which contains risk and currency weights.Under fixed exchange rate conditions,we observe the minimum risk with specific yield,and carry on under two situations,one of which is according to the point of view of purely the benefits and risks,and one of the other is according to the actual situation of foreign exchange reserves.The empirical results show that under fixed exchange rate conditions,whether from the point of view of the benefits and risks or according to the actual situation of foreign exchange reserves,the RMB's entry into SDR basket can produce good effect on China's foreign exchange reserve assets.This shows that China's foreign exchange reserve assets get a better control of the risk of foreign exchange reserves after RMB's entry into SDR basket.So RMB's entry into SDR basket can provide China a good foreign exchange reserve investment tools.At last,this paper provide some suggestions for perfecting RMB's internationalization from aspects of improving the credibility of monetary authorities,accelerating market-oriented interest rate reform,the progressive realization of capital account liberalization,deepening the reform of the RMB exchange rate system,accelerating the reform of the financial system and perfecting financial supervision and puts forward a series of policy recommendations.