Research On Moderate Scale Of Chinese Foreign Exchange Reserve Based On Model Of Agaraual

Foreign exchange reserve has important functions.It can melt the deficit of balance of payments, interfere in the foreign exchange market, maintain the stability of the exchange rate of its own currency, and borrow and repay the loan, etc.Foreign exchange reserve of our country increases very quickly in recent years. It has reached 1900 billion US dollars by now. FER is not the more the better. There are certain costs to hold it. Too rapid increase of FER will bring a series of questions, for example, the pressure of inflation, resulting in the pressure of revaluation of its own currency, reducing the dependent right of the Central Bank currency policy and producing negative influences on the adjustment of industry configuration. It is very significant to hold moderate scale of FER.In this article, the author first has combed international and domestic theories about the moderate scale of FER; elaborated effect factors, history and character of FER; then through building model of holding FER, got major variables of increasement of FER; basing on Agaraual model, the author has improved the model and analyzed the appropriate FER scale of our country in recent years by applying the newly improved model. The author draws conclusions as follows: the real scale of our FER is smaller than the low limit of moderate scale in 1994 and 1995, which shows that the FER is not enough; it is between the high and low limit of moderate scale from 1996 to 2001, so it is reasonable in these years; since 2002, the practical scale is larger than the high limit of moderate scale; and as time goes on, it is larger and larger. And then the author analyzed the reasons of rapid growth of FER of our country, and evaluated positive and negative impacts, cost and efficiency on our large scale of FER. In the end of this article, the author provides some policy proposals for combination of rational reserve scale and efficient reserve management.