Research On The Linkage Relationship Between Fast Growth Of Foreign Exchange Reserves And Inflation

Based on monetary and financial theory, this paper research on the foreign exchange reserves growth on the impact of inflation and its linkage relationships. I adopted the method of combining theoretical and empirical analysis and summary of the status of foreign exchange reserves rose to the transmission mechanism of inflation on the basis of foreign exchange reserves growth, selected in2000to2010the inflation rate, foreign exchange reserves, growth rate, exchange rate growth, excluding funds outstanding for foreign exchange after the money supply growth rate (net money supply growth rate) as an index, and quantitative analysis of the foreign exchange reserve growth and the inflation rate, as well as other relevant variables between dynamic and thus more accurately grasp of foreign exchange reserves growth mechanism of the impact of inflation, in order to provide a reference for the government to develop appropriate policies and recommendations.First, this paper introduce the concept of inflation, causes of inflation, on this basis, analysis of foreign exchange reserves increased to the transmission mechanism of inflation, as well as the overall growth of China’s foreign exchange reserves in recent years the situation and characteristics, the last use of the VAR model,analysis foreign reserves growth dynamic relationship between the inflation rate, as well as other relevant variables. The empirical analysis concluded that:(1)Long-term, sustained positive impact on the foreign exchange reserves cause the rapid growth of China’s inflation rate.(2) Inhibit the hedging operations of the central bank on inflation over an extended period.(3) The rapid appreciation of the exchange rate of RMB to reduce the scale of China’s foreign exchange reserves, and inhibit China’s inflation has a positive effect.Support the rapid growth of China’s foreign exchange reserves through the empirical analysis on the inflation rate has a significant impact on the conclusions, and affirmed the sterilization operation, the yuan appreciation to reduce the scale of China’s foreign exchange reserves, inflation. Finally, based on the above empirical findings, the right to control inflation in China-related policy proposals.