An Analysis of the Impact of China’s Foreign Exchange Reserves on Inflation
Abstract
Based on China's central bank balance sheet, Fisher equation and balance of payments monetary analysis, the influence of foreign exchange reserves on China's inflation is analyzed. On this basis, the article makes an empirical analysis of the relationship between foreign exchange reserves and inflation. The results show that there is a long-term equilibrium relationship between China's foreign exchange reserves, consumer price index (CPI), producer price index (PPI) and corporate goods price index (CGPI). Furthermore, the foreign exchange reserve (whcb) has a positive effect on the producer price index (PPI) and corporate goods price index (CGPI), which is more than the positive impact on the consumer price index (CPI). The growth of foreign exchange reserves is the cause of inflation, and the expanding size of foreign exchange reserves are contrary to the monetary policy targets of maintaining the stable value of the currency.
Keywords
Foreign exchange reserves; inflation; impact analysis.
DOI
10.12783/dtssehs/adess2017/17851
10.12783/dtssehs/adess2017/17851