An Empirical Study On The Relationship Between RMB Exchange Rate Misalignment And A Share Market Volatility After Financial Crisis

In recent years, with the rapid development of China economy, China has accumulated a huge trade surplus and huge foreign exchange reserves. Concurrently, America, Japan, Europe and other countries require adjustment of RMB exchange rate has become a persistent issue. At the same time, China has been exploring the reform of the RMB exchange rate system, hope to be able to achieve more flexible RMB exchange rate mechanism; however, in September 2008, in order to cope with the international financial crisis, our country proper control of the RMB exchange rate fluctuations, which means that the interruption of the reform of the RMB exchange rate to a certain extent, it also means that our country may appear exchange rate misalignment. According to the capital profit driven nature, exchange rate misalignment is likely to lead to a country’s economic impact, in order to investigate the relationship between exchange rate misalignment and Chinese micro economy, further research is done on the stock market in this paper.In order to study the relationship between the exchange rate misalignment and the volatility of the stock market, this paper select the theories of equilibrium exchange rate and exchange rate and stock price transmission mechanism theory. On this basis, related literature at home and abroad were reviewed. Based on the empirical analysis, specifically in three steps:First of all, select the basic economic factors, using the behavioral equilibrium exchange rate model (BEER) to measure the RMB equilibrium real exchange rate. Secondly, according to the equilibrium real effective exchange rate and the actual effective exchange rate to calculate the deviation degree of the RMB exchange rate. Finally, this paper research the relationship between RMB exchange rate deviation and stock market volatility.The results show that:(1) The basic economic factors selected in this paper can effectively explain the real effective exchange rate of RMB. On the one hand, there is a positive correlation between the labor productivity, government spending on nontraded goods, trade conditions, the degree of openness and monetary policy and the real effective exchange rate of RMB. On the other hand, net foreign assets and RMB real effective exchange rate has reverse change. (2) Since 2008, the RMB exchange rate misalignment is a normal phenomenon, not only has there been an undervalued renminbi, have also been overvalued, at the same time, since the beginning of the fourth quarter of 2011, RMB real effective exchange rate imbalance rate and duration than the first two stages have been improved. (3) Exchange rate misalignment will the impact of China’s stock market through the conduction mechanism, and the impact of the stock market’s volatility of exchange rate market is not obvious.Finally, in order to reduce the degree of exchange rate misalignment and reduce its impact on the stock market, this paper put forward three suggestions:(1) Adjust China’s foreign economic policy, change the economic development of our country. The specific structure:means for expanding domestic demand, increasing imports, to encourage foreign investment. (2) Promote the reform of the RMB exchange rate system, improve the exchange rate formation mechanism steadily. Specific performance:reduce human intervention, adjust the benchmark interest rate reference standard, diversify our exchange rate adjustment tools. (3) Enhanced monitoring the flow of international capital, enhance the stock market anti risk ability. Specific recommendations are as follows:reduce the exchange rate misalignment, improve the information disclosure mechanism, and increase the stock market listing Corporation investment choice and perfect risk control system.