The Impact Of The Fed's Interest Rate Increase On China's Foreign Exchange Reserves

With the continuous advancement of global economic integration,the state and the country have become more and more closely related.And the United States as the world's largest economy in the world economic system occupies the dominant low,U.S.monetary policy affects the economy on one hand,on the other hand had important influence on the rest of the world economy.The current dollar,the most important reserve currency in most countries,has been significantly affected by the impact of us monetary policy.As the world's largest foreign exchange reserve,China's foreign exchange reserves have been hit by different levels in the past three interest rate hikes.Draw on the existing literature.,this paper selects data from January 1996 to December 2017 monthly,builds with stochastic volatility of bayesian vector autoregressive model(TVP-SV-VAR),through the empirical analysis on the impact of the federal reserve to raise interest rates on China's foreign exchange reserves the time-varying characteristics and structural changes,combined with China's interest rate,the RMB real effective exchange rate and three conduction way to explain China's money supply.Results show that the federal reserve to raise interest rates in June 1999 a negative impact on China's foreign exchange reserves in the short term,in June 2004 and December 2004,the federal reserve to raise interest rates on China's foreign exchange reserves from negative to positive structural impact in the short term,medium and long term effect is more and more weak,and the prudent monetary policy,the internationalisation of the renminbi,as well as interest rate marketization,when the federal reserve to raise interest rates three times shock adjustment,to keep a proper scale of China's foreign exchange reserves played an important role.Epilogue,according to the federal reserve to raise interest rates policy Suggestions are put forward for the influence of China's foreign exchange reserves,on the one hand,continue to implement prudent monetary policy and fiscal policy and moderately to accelerate the process of marketization of interest rate,effectively cope with the federal reserve to raise interest rates and the impact of the macroeconomic events such as the financial crisis to ensure the continuous stable and healthy growth of China's foreign exchange reserves.Word,on the other hand,since the interest rates in December 2015,Chinese foreign exchange reserve is impacted by the federal reserve to raise interest rates more and more weak,more sure to promote the process of RMB internationalization in our country,as well as increase the elasticity of the RMB exchange rate floating,and the economic growth as the structural adjustment,our country should pay more attention to domestic financial regulation,reduce external dependence,prevent systemic financial risks,avoid too high or too low pressure risk of foreign exchange reserves.