Analyse On The Relationship Between The Fluctuations Of RMB Exchange Rate And Stock Price Changes

From the theory and practice of developed countries, there is a strong correlation between the foreign exchange market and the stock market,In other words, the effects of fluctuations in the exchange rate of a country that would cause the country's stock price index fluctuating, the volatility of stock price index will also lead to the same volatility of a country's exchange rate.the Shanghai Composite Index showed up-down-the rise from 2005 to 2009,but about 5 years time to see the big trend is up.Central parity of RMB against the U.S.dollar and other exchange rate despite slight fluctuations, but the overall trend is declining, to December 31,2009 was 682.82.Exceptions for the yuan against the euro, in general, showed a similar fluctuations trend with the Shanghai Stock Index.In the global financial crisis and Rmb and the rmb appreciation is expected to continue to increase situation, The correlation between the central parity of RMB exchange rate and stock prices is important.we first give background and significance of studying on the relationship between the stock price volatility and RMB exchange rate fluctuations.Secondly is the introduction of the relevant theories and pathway between the exchange rate and stock prices,and correlation between the RMB exchange rate fluctuations and stock price volatility are analyzed theoretically.Thirdly through empiricalanalysis show that RMB exchange rate against dollar and stock prices has two-way causality, but the RMB exchange rate against the EURO and YEN and the stock price do not exist neither cointegration relationship nor causal relationship, And through establishing the VEC model found that the RMB exchange rate against the U.S.dollar and stock prices has a weak reverse a long-relationship, at the same time,through impulse response and variance decomposition we also found the influence of the RMB exchange rate Fluctuations to Stock Price Fluctuations is greater than the influence of Stock Price Fluctuations to the RMB exchange rate Fluctuations.Finally,putting forward a number of recommendations to promote the steady development of foreign exchange market and stock market from intermediary, foreign exchange and stock markets three aspects.