Research On The Linkage Between Rmb Exchange Rate And Stock Price In The Process Of Exchange Rate System Reform

With the continuous development of China’s economy,China’s voice in the international are also rising,and because of economic globalization,financial liberalization continues to promote,also contributed to China’s economic and financial continue with international practice,and constantly try to open to the outside world.In recently years,the reform of the RMB exchange rate system,the gradual opening of capital projects,RMB to join the SDR,these things further internationalization of the RMB,and the stock market split share structure reform,Shanghai-Hong Kong Stock Connect program,Shenzhen-Hong Kong Stock Connect program and so on,these are the embodiment of China’s financial liberalization."13th Five-Year Plan" to further clarify the proposed two-way to promote the opening of China’s financial markets,so in the future China’s capital market will be more open,the RMB exchange rate will also be more flexible,which will stability of China’s financial markets to a greater challenge.Asian financial crisis,the euro exchange rate reform crisis experience reminds us that the interaction of exchange rate volatility and stock price shocks will make a huge impact of country’s financial markets and the real economy.Therefore,exploring the linkage between the exchange rate and the stock price&the conduction pathways of them,can has an important role to stabilize the financial markets and to ensure the healthy development of the economy.This paper first combine the classical theory of the exchange rate and stock price.Second,the VAR-GARCH-BEKK model is constructed to study the exchange rate and stock price mean-value spillover and volatility in the course of the exchange rate mechanism reform,according to the actual situation of China’s exchange rate system reform and stock market development.Thirdly,on the basis of the conclusion that the interaction between RMB exchange rate and stock price should be based on the traffic-oriented model,the paper conducts an empirical test on the conduction pathways between RMB exchange rate and stock price,constructs VECM model to analyze foreign trade,international capital flow,interest rate,money supply,and the investor’s expectation that these five factors affect the price of the RMB exchange rate.The empirical results show that there is a one-way mean spillover relationship between the RMB exchange rate and the stock price,which is consistent with the traffic-oriented model applied by developing emerging economies.However,with the relaxation of the fluctuation of RMB exchange rate,there are two-way mean overflow between them,but the whole is consistent with the traffic-oriented model.The volatility spillover point of view,due to restart the exchange rate reform,the RMB exchange rate volatility to further expand the effectiveness of the market continues to improve,so before the restart the exchange rate exchange rate and the stock price fluctuations between the two-way spill,after it,the spillover effect if not significant.In addition,the empirical results of the five conduction pathways show that the RMB exchange rate has a significant effect on the stock price,but the contribution of the RMB exchange rate fluctuation to the stock price fluctuates under each transmission path are not same.Finally,according to the results of empirical test,the paper make policy recommendations of how to develop our foreign exchange market,stock market and the conduction pathways,so as to ensure the economy can steady development with China’s financial opening.