Real Exchange Rate Misalignment And Stock Price

With the trend of economic globalization and financial liberalization,the rapid development of international financial market makes the economic development of all countries become more and more integrated,especially the relationship between the foreign exchange market and the stock market.Stock is regarded as a "barometer" of the economic development of a country.It reflects the development of a country's economy.As a measure of the relative price of a country's purchasing power,the exchange rate reflects the competitiveness of a country's goods.From the empirical study of the exchange rate and stock price of the existing point of view,the relationship between the two is no unified conclusion,most research results that exists between the two one-way,reverse or two-way interaction,which is mainly due to differences caused by the economic system and the choice of the.While the research on the real exchange rate misalignment is mainly focused on its role in the development of a country's economy,the exchange rate will stimulate the economic development,the exchange rate will inhibit the development of the economy.For countries that have not yet market-oriented exchange rate,the exchange rate is prone to imbalance,and exchange rate misalignment in the case of short-term capital is completely open to the impact of a country's stock market.To study the impact of exchange rate misalignment on a country's stock market is conducive to the development of relevant macroeconomic policies to deal with the impact of exchange rate misalignment on the stock market.For the further research on the real exchange rate misalignment effect on stock price,exchange rate and stock market based on the theory,combining qualitative and quantitative analysis methods,this paper selects countries with the stock market,BEER model was used to estimate the real exchange rate misalignment value of real exchange rate misalignment on the stock price impact.The empirical test is divided into two parts:the first analysis of the real exchange rate misalignment total impact on the stock price,then the real exchange rate misalignment into undervalued real exchange rate overvaluation and real exchange rate underestimated and overestimated the influence analysis of the direction and extent of stock price.In order to distinguish the difference of the real exchange rate misalignment between countries with different income levels,this paper divides the sample countries into high income and low income countries.This paper is divided into five chapters.The first chapter describes the research background and significance of this study.The second chapter introduces the literature on exchange rate misalignment and the literature on the relationship between exchange rate and stock price.In the third chapter,it analyzes the relationship between exchange rate and stock price,analyzes the theoretical mechanism of the real exchange rate and the stock price.The fourth chapter is the empirical part.First,the BEER model is used to calculate the equilibrium real exchange rate of the 36 countries,and then study the effect of the real exchange rate misalignment on the stock price.The fifth chapter is the policy implication,to guard against the negative impact of exchange rate misalignment on the stock market,we should perfect the formation mechanism of exchange rate market,and open the capital market carefully.This study shows that the real exchange rate misalignment impact on the stock price of "inverted U",i.e.the real exchange rate misalignment overestimate will promote the stock price initially,after reaching a certain stage that consistent with theoretical judgment.This may be because the overvalued exchange rate appreciation is due to the appreciation of exchange rate that cause capital inflows and stock prices rose,but when the appreciation of exchange rate reached a certain stage and the appreciation expectation reversals that cause depreciation expectation triggered capital outflows caused price declines;After the actual exchange rate misalignment is decomposed into underestimate and overestimate,real exchange rate undervalued will promote the stock price rise,the real exchange rate overvalued will make the stock price fell.And the role of underestimate promote the stock price greatly exceed the role of overestimate the inhibitory effect on stock price,embodied as non symmetry effect.In order to guard against the impact of exchange rate misalignment on the stock market,we should open up the capital market,especially the opening of the short-term capital flow project.Secondly,we should improve the exchange rate formation mechanism,strengthen the supervision of cross-border capital flows,enrich the exchange rate hedging instruments,and strengthen the coordination of monetary policy and exchange rate policy.