| July 21, 2005, the Party and State Council declared China began to implement a new exchange rate rule which is to make the market supply and demand as the basis and referent to a basket of currencies, it's no longer to referent with a single U.S. dollar, this exchange rate system is much greater flexibility then before. Since the new exchange rate system was implemented, the appreciation of the RMB exchange rate has been in the situation, the RMB exchange rate directly affect the situation of import and export trade, while affect the foreign and domestic investor's actual capital, and will affect the investor's expectation of the Chinese economy and exchange rate. It results to change the investor's portfolio and equity investments and then affect our capital markets.In fact, in 2005, after the reform, the stock market did have a series of changes. The Shanghai composite index increase from July 20, 2005, 1021.05 point to October 16, 2007, 6124.4 point. In the background of the global financial crisis, the index always decreases until to 1664.93 point on October 28, 2008. Similarly, in developed countries and regions also have the same situation, there is certain relationships between the stock market and the exchange rate market. For example, Japanese stock market and foreign exchange market have sharp fluctuations after signing the Plaza Accord, and there is the familiar affection in last 1980s in Taiwan who has undergone the linkage relationships between stock and currency markets. Foreign scholar has pay attention to this phenomenon early; foreign and domestic scholar has done a lot of theoretical and empirical research, but doesn't have a consistent conclusion.The authors consider that exchange rate fluctuations will have different impact on different industries, so this thesis addresses the classification of the stock index forms to analysis the relationship between the exchange rate fluctuations and changes in every industry stock index; and most domestic scholar make the stock market and exchange rate before of after 2005 July 21, as the object of study, to analyze data and discusses the relationship between two variables. But the author thinks that the relationship between exchange rate and stock index is not entirely the same in a different economic circumstances, because in addition to the current account and capital account which are the intermediate variable factors, there are more variables we could not be quantified, such as investor's investment habit and expectation in different economic cycles, and so on. So this thesis will do empirical analysis of the currency markets and the stock market in different economic situation, in addition to, this thesis will do the analysis of stock and exchange rate market from 2005 to 2009, to compare with three test result and find the similarities and differences among them, this can help us to analyze the relationship between exchange rate fluctuations and industry stock index changes in a much scientific way.From the point of view in exchange rates and stock market to research the relationship between Renminbi against the US dollar exchange rate changes and various industry of the stock index fluctuations. To analyze the two variables time series of July 2005 to October 2007, Oct 2007 to July 2009, and July 2005 to July 2009 respectively. This thesis mainly use of Cointegration test, to construct VAR model, then use Granger causality test and the impulse response function. Get the following conclusions:There are the long Cointegration relationship between various industries stock index volatility and exchange rate. Exchange rate is the Granger"cause"of the spin industry under the 10% significance level. And except for spin industry, there is no Granger causality relationship between two variables.Secondly, in July 2005 to October 2007 period, there are different relationship between industry stock index and exchange rate. There are long-term cointegration in some industries, such as finance, service, petrochemical, utilities, transportation, extractive, real estate, wholesale and retail industry, paper industry, metals, machinery, timber industry. See from the results of the Granger causality test, there is no Granger causality relationship between two variables.Finally, in October 2007 to July 2009 period, there is no Granger causality between exchange rate fluctuations and industry stock index changes. However, the finance industry index is the Granger"cause"of exchange rate fluctuation. |
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