Analyzing the problem about Chinese Excess Liquidity from the aspect of foreign exchange reserves
Abstract
In recent years, with the rapid development of our country’s economy and opening up to the world, the problem of huge foreign exchange reserves and excess liquidity has emerged as a major issue in the progressing course of economy. The thesis maintains that the foreign exchange reserves overgrowth will bring about a series of problems to our country’s macroeconomic coordination, and the biggest worry of them is the excess liquidity is out of control. So if we only choose the common monetary policy instrument to control the excess liquidity, it will have considerably limitations. In order to making the common monetary policy instrument more effective, we shall undertake to analyze the problem of our country’s excess liquidity from the aspect of foreign exchange reserves. The thesis goes into the subject on what connection between the foreign exchange reserves and the money supply is, what the degree of influences of increasing foreign exchange reserves and excess liquidity, etc, by a few kinds of methods. And bases on the reason as a guide to provide related evidence for our country’s foreign trade policy. In this way, the problem of excess liquidity can be resolved.
Key words: Foreign exchange reserves Excess liquidity Money supply
Foreign trade policy