This paper makes the improvement for the moderation of foreign exchange reserve scale in China which are proposed by Agarwal model and Wu Jian model,puts forward a new model which combines the advantage in both two models,and analyzes the moderation of foreign exchange reserve scale in recent year

Based on existing literatures on desired foreign exchange reserve and RMB s equilibrium exchange rate, this paper measures the desired foreign exchange reserve since 1980s by adopting the cointegration methodology in econometrics under the actual circumstance of our country, and analyzes the main causes leading to the maladjustment of foreign exchange reserve during the recent twenty years.

It is of great significance to a country’s far-reaching development and stability for a country to keep a moderate quantity of foreign exchange reserve,the establishment of which include the method of proportion analysis,the method of regression analysis and the method of cost-profit analysis.

functions of foreign exchange reserve are not recognized clearly, scale of foreign exchange reserve is considered in static way, and situation of most developing countries is not considered.

This makes people feel delighted, but meanwhile a large scale of foreign exchange reserve has caused a variety of dispute both at home and abroad.