The empirical research of the impact of GDP and exchange rate on foreign exchange reserve scale in china-based on quantile regression model

Abstract

Based on the relevant data from 1985 to 2010, this thesis uses a quantile regression model to make an empirical research about the effect of GDP and exchange rate on foreign exchange reserve. The findings show that: Both GDP and exchange rate have a remarkable influence on the size of foreign exchange reserve and the effect of exchange rate on foreign exchange reserve is higher than GDP at mean place and middle and lower quantile, smaller than GDP at higher quantile. At all the examined quantiles elastic coefficients of GDP and exchange rate are positive and among them, the elastic coefficients of GDP present us a reverse "V" model with the conditional distribution altering from low to high, that is, the impact of GDP on foreign exchange reserve shows an increasing trend when the latter is smaller, but begins to decrease when the latter reaches to a certain level; the elastic coefficients of exchange rate at lower quantiles are bigger than that of higher quantiles. © 2013 Maxwell Scientific Organization.