The Investment Portfolio of China’s Foreign Reserves——An Endogenous Perspective of Foreign Reserves Flow Cycle
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| Title | The Investment Portfolio of China’s Foreign Reserves——An Endogenous Perspective of Foreign Reserves Flow Cycle
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| Author | Liu Lanbiao and Zhang Jingjia |
| Organization | Nankai University |
| Email | liulanbiao@vip.sina.com；vanillajiajia@hotmail.com |
| Key Words | Foreign Reserves; Portfolio; Stackelberg Model; Cournot Model |
| Abstract | This article has established a Stackelberg and a Cournot game model, involving the central banks, financial markets of China and the U.S. as well as the real economic sector of China in order to depict a cycle of the foreign investment of China’s foreign exchange reserves through the perspective of the essential differences of China and the U.S. Besides, we have simulated the optimal investment portfolio of China’s foreign reserves and its contribution to China’s domestic economy. The results have shown that the risky assets investment of China’s foreign exchange reserves on the U.S. assets will affect the proportion of which China’s reserves transform indirectly into the FDI to China from the U.S. However, the reaction of our central bank has been relatively slow. Therefore, in order to enable our central bank to gain profits, we suggest that it is necessary to bring down the CRRA coefficient of our residents, and improve our financial market development as well. |
| Serial Number | WP152 |
| Time | 2011-11-09 |
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