Transmission effects of foreign exchange reserves on price level: Evidence from China

► We investigate the transmission effects by utilizing nonparametric models. ► We employ VAR co-integration analysis to obtain the number of lagged periods. ► We estimate the two kinds of elasticity with nonparametric estimations. ► We calculate the cross elasticity of foreign exchange reserves to consumer price index. ► We find that increase in foreign exchange reserves will lead to increase in price level.