Research On The Influence Of Funds Outstanding For Foreign Exchange On Money Supply In China

The large foreign exchange reserves is a threat to China’s macro economy. Especially in the current international economic situation is complex and changeful, the economy of Europe and the United States experienced a cyclical bottom, from depression began to recover. In order to promote the economy as the objective, many countries have adopted a loose monetary environment, a large injection of liquidity to the market. Our country has experienced the subprime mortgage crisis and the European debt crisis, the steady development of the domestic economy, the upgrading of the industrial structure gradually, the enormous domestic demand is gradually developed into the economy, is bound to attract foreign investors and international speculative capital. Foreign exchange inflows may promote export-oriented enterprise development, to provide more employment opportunities, but foreign exchange inflows will increase the scale of foreign exchange, injecting excessive monetary funds into the money market, will increase our input type inflation and speculative financial market asset bubble risks.In China’s current management floating exchange rate system and the international balance of payments capital project control, foreign exchange inflows continued through the banking system will become a huge foreign exchange settlement and sale of foreign exchange, therefore, how to strengthen the reserve scale management, excessive foreign exchange reserves and offset against exchange accounted for on money supply channel has the very strong reality the economic significance of financial regulatory policy more effective. This article starts on the endogenous money theory research, analysis of the current economic situation, the influence mechanism of monetary multiplier effect of foreign exchange reserves on the central bank on monetary basis and the circulation, through the comparison of proportion, that foreign exchange reserves will increase the endogenous money supply. And then combined with the latest economic data, the empirical model of factors affect the amount of money supply include foreign exchange, to discuss the effect of changes in foreign exchange and correlation between M2and foreign exchange on the M2. The advantages and disadvantages of again through the analysis and comparison of current foreign exchange sterilized intervention practices and tools, to discuss the effectiveness and sustainability of our monetary sterilisation. Finally, combined with the specific situation in China, put forward the improvement of China’s foreign exchange sterilized and foreign exchange reserves management system policy suggestions.