This study employs pure-sign-restriction approach analysing the macroeconomic impacts of
foreign reserve accumulation and discusses the foreign exchange sterilization behaviour of the
s Bank of China (PBoC). Sign restriction analysis shows that the effects of reserve accu
mulation shock are initially ambiguous on all variables, but later a positive influence only on base
oney can be observed. With regard to sterilization intervention, the effect is significant even though it degrades gradually over time. In China, the monetary authority actively undertakes sterilization intervention in order to remove the influence of passive release of base money caused by foreign reserve accumulation.
KEYWORDS：Foreign exchange reserve accumulation; sign restriction; sterilization intervention