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Capital Control, Financial Depth and the Demand of Foreign Reserves: Evidence on 1994-2013 Data in China

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We combined foreign reserves, capital control and financial depth with other economic variables in the same model and discussed the factors that affect the demand of China’s foreign reserves. The results showed that 1) a considerable number of foreign reserves are passively accumulated, for instance, stronger capital controls deeper financial system will lower the demand of foreign reserves; 2) the ratio of Hot Money/GDP is more significant than the FDI/GDP as a proxy of foreign reserves’ protective demand.
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Lu, D. and Liu, Z. (2014) Capital Control, Financial Depth and the Demand of Foreign Reserves: Evidence on 1994-2013 Data in China. Open Journal of Social Sciences, 2, 6-11. doi: 10.4236/jss.2014.29002.
 

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