The Study Of The Impact Of Exchange Rates Fluctuation On China’s A-share Stock Market Price

Exchange rate is the price of the currency of a country relative to the currency of another country. The fluctuations of the exchange rate determine the actual purchasing power of the national currency. The stock market is a barometer of the economic development situation of a country. Exchange rate reflects the economic relationship between two countries. However, the price of the stock market reflects the economic situation of a country itself. The stability of exchange rate and the price of stock market is becoming particularly important to the economic development of a country, with the pace of internationalization of economics gets more and more fast, the degree of it gets deeper and deeper, and the relationship between exchange rate fluctuations and the price of stock market gets more and more closely. We have made great progress since the exchange rate regime reform in2005, but the exchange rate regime of China is still not that mature and perfect. In addition that the financial industry of China is lagging behind the developed western countries, so the development of our exchange rate regime is uncoordinated compared with the current economic situation of China. Therefore, under the ground of the current economic situation of China, the study of the impact of exchange rate fluctuations on the price of stock market is particularly important.The paper is constituted of four parts. The first part is institution. The purpose of research and the findings of experts and scholars at home and abroad are described in this part. Second, the theoretical basis and transmission mechanism of the impact of exchange rate fluctuations on the price of stock market are elaborated in Chapter1. In the Chapter of model analysis, the derivation of Granger Causality Test, Co-integration Test, and Analysis of Variance are discussed. Third, the relationship between exchange rate fluctuations and the price of stock market is so complicated that it becomes difficult to draw out results with general Linear Analysis. Therefore, the paper chooses Granger Causality Test, Co-integration Test, Impulse Response Functions, and Variance Decomposition, which are commonly used in foreign mature theory, to test the existence of Equilibrium Relationship between exchange rate fluctuations and the price of stock market, and the impact of exchange rate fluctuations on the price of stock market. Fourth, the paper finally proposed recommendations to develop Chinese foreign exchange market and stock market stably on the basis of empirical analysis, from macro and micro perspective.