Paper Title
The Impact of Exchange Rate on Foreign Exchange Reserves: The Case of China

Abstract
This study investigated the impact of China's foreign exchange rate fluctuation on the change of foreign exchange reserves using monthly data of China-U.S. foreign exchange rate, nominal effective exchange rate and total reserve from January 1995 to December 2016 by applying MODWT wavelet decomposition method, quantile regression analysis and Granger causality test. The main findings are as follows. (1) The estimation results of quantile regression analysis for non-decomposition time series are different with those for wavelet decomposition time series. (2) The results of Granger causality test for decomposition time series show that the fluctuations of the exchange rates affect the changes of foreign exchange reserves in the medium and long term. The filtering of the wavelet decomposition effectively finds the Granger-causal relationship from decomposition time series which is not observed in the non-decomposed time series. (3) In the short term, China's foreign exchange rate fluctuation has a negative(-) effect on the change of foreign exchange reserves, implying that foreign exchange reserves increase when the Renminbi appreciates. The exchange rate fluctuation is not a cause of the change of the foreign exchange reserves in the medium and long-term, but at least it is a predictor variable of the foreign exchange reserves. Keywords- Foreign Exchange Rate; Foreign Exchange Reserve; Quantile Regression; Wavelet Decomposition