The Measure Of The Appropriate Scale Of The BRICS’s Foreign Exchange Reserves Based On The Modified JR Model

Emerging economies was brought into an era of rapid development by the third global industrial transfer at the end of the twentieth Century. In this period,the BRICS had a rapid rise though 20 years of development and the proportion of the world GDP rose from 7.2% in 1991 to 20.3% in 2012, that increased by nearly three times. As economic strength increasing, the international balance of payments surplus and the global financial turmoil, the BRICS’ foreign exchange reserves has entered a rapid growth track, and so far they occupied 41% of total global foreign exchange reserves. As we all konw, foreign exchange reserve is very important reserve asset, which can meet a country’s various needs, but conversely either excess or shortage it may will cause negative effect. Specifically, the inadequate currency reserves will weaken the ability to resist external risk and reduce the investment confidence. However, it is not the more the better, on one hand, sufficient foreign exchange reserves can enhance the anti risk ability and meet the various needs and so on, but on the other hand it also brings much higher opportunity cost, idle resources and instability of currency. For that, it becomes very important to maintain a reasonable scale of foreign exchange reserve, and the science of measurement becomes an important premise naturally. In addition, one country also needs to focus on foreign exchange reserve structure stability. Therefore, the scientific management of the scale and structure of foreign exchange reserves is a security for high quality and a reasonable level.The author put the BRICS as the object of study in this paper, first the author analyzed the scale and structure of foreign exchange reserve and the reasons for high speeding growth. Then, through the comparison of the former theory, this paper decided to adopt the JR model and made some amendments basing on the previous principle. The author analyzed the change of the scale of foreign exchange reserve and measured the moderate scale for the BRICS countries. As a conclusion, the author thought that foreign exchange reserve of Chinese and Russia were absent before 2003, and were superfluous after 2003. Brazil was lacking before 2007 and became superfluous after 2007. This excessive gap was likely to widen in Russia, Brazil and China. After 2001, India’s foreign exchange reserve was relatively reasonable, but in the last two years appear signs of deficiency, but South Africa had a long-term shortage. Finally, we discussed the effective management of foreign exchange reserve advice according to the results of empirical analysis and the causes of the rapid growth of foreign exchange reserve, such as adjusting the balance of international payments and the establishment of foreign exchange reserves base etc. Aiming at the problem of the structure of foreign exchange reserve, we put forward some simple suggestions.