This paper studies the impacts of foreign exchange reserves intervention under the economic structures of China that feature capital controls, managed floating exchange rate and partially sterilized intervention. The central bank transacts government bonds to sterilely intervene the foreign...

China has experienced a large increase in its foreign exchange reserves since 2001, due to a continuous inflow of capital and the commitment to maintain a fixed rate against the dollar initially and then a crawling peg exchange rate regime. Among other things, the accumulation of foreign assets...

Current account deficits in the United States (US) and current account surpluses in East Asia are an enduring part of the global economic landscape. They are supported by low saving in the US and by reserve accumulation in Asia. This paper argues that this strategy is causing macroeconomic...

Motivated by the Chinese experience, we analyze a semi-open economy where the central bank has access to international capital markets, but the private sector has not. This enables the central bank to choose an interest rate different from the international rate. We examine the optimal policy of...