Rmb Exchange Rate And Stock Price Correlation Between The Empirical Analysis

As the economy's barometer,the stock market reflects the level of activity of a country's economy,which is an important component of the capital market; As the price of foreign exchange, exchange rate reflects the relative price of a country's goods and foreign goods, it is an integral part of the money market. With the diversification of the world economy and the deepening of global financial integration process, the correlation between exchange rate and stock prices as the price of the stock market and foreign exchange market is growing. China's exchange rate system and the stock market have undergone major changes in 2005. After the reform, the RMB exchange rate implements a managed float, while the liquidity of stock market has increased, the linkages between China's foreign exchange market and stock market become an issue of concern in the academic community, in the context of the appreciation of the RMB exchange rate, it has an important significance to study the influence between exchange rate and stock prices to prevent the impact of the financial markets caused by exchange-rate appreciation.This paper describes the studies on the relationship of the exchange rate and stock prices at home and abroad, then use the flow-oriented model and the stock-oriented model to analysis correlations, followed by a detailed analysis of the channels which exchange rate is passing through to impact the stock price, and based on the analysis of transduction pathway, use vector autoregressive (VAR) methods to respectively study the relationship between the exchange rate and stock price before and after the exchange rate reform from various point, applying the cointegration test and Granger causality test and impulse response functions and variance decomposition in the analysis. The results show that:Before the reform, the exchange rate the exchange rate,the Shanghai A Share Index as well as Shanghai B Share Index don't have a long-term dynamic relationship, Granger causality test results also confirm the same conclusion; After the exchange rate reform, they have a long-term dynamic relationship, in which the Shanghai B shares subject to a greater impact from the exchange rate, Granger causality test shows that the exchange rate is a one-way Granger of the stock price. Finally on the basis of empirical tests,I make a number of policy recommendations to intermediate variables,the exchange rate system and the stock market.