China's Foreign Exchange Reserves, Moderate-scale Empirical Research

For a country of economic openness, foreign exchange reserves is significant, which is the balance of international payments, the security of borrowing and repayment of foreign debts, the means of intervening in the foreign exchange market, and the important guarantee for maintaining exchange rate stability. A reasonable reserves scheme is an important component of monetary policy for a country or region. In this paper, for the phenomenon of sustained rapid growth to the size of China's foreign exchange reserves, we research the reasonable size of China's foreign exchange reserves, combined with the classical theory of economics and statistical research methods.In this paper, we select the research methods of a combination of static analysis and dynamic analysis. The static analysis, based on the economics of the demand theory and the cost-benefit theory, tries to build a reasonable size's target range of China's foreign exchange reserves. The dynamic analysis, based on the cointegration theory, tries to build the demand model and dynamic adjustment model of China's foreign exchange reserves, and to calculate the Dynamic adjustment speed coefficient. Two different methods obtain one point:that since the foreign exchange system reform in1994, the size of China's foreign exchange reserves is reasonable in most years, yet there has been the phenomenon of excessive growth from 2006 onwards.In this paper, we abandon the traditional research methods of using'MR= MC theory'to find the equilibrium value, and turn to seek the maximum by using 'TR= TC theory'. Then we can put the question of foreign exchange reserves'size into a range to research. We also build dynamic adjustment model for estimating an appropriate value to support the point. The approach of considering the range of devalued dollar in recent years in the empirical calculation makes the conclusions more practical significance.