The Study Of The Correlation Between RMB Exchange Rate And Shanghai Composite Index

With the deepening of global economic integration and the intensification of finance deepening,there is an increasingly close relationship between the financial submarkets.In terms of market price fluctuation,both each financial sub-market itself and other financial sub-markets have an increasing influence on the market price.The stock price index has been regarded as a "barometer" of the national economy,which is sensitive to subtle changes in a country's real economy.The exchange rate,which is the comparison between the two countries' currencies,representing the price when an country's currency exchange with other currencies in the foreign exchange market.Foreign exchange is inevitable in cross-border transactions.Therefore,the fluctuation of exchange rate reflects the change of the international purchasing power of a country's currency.Since the international purchasing power of a country's currency is partly influenced by the economic fundamentals of the country,the change of the exchange rate also reflects the trend of a country's economic fundamentals.After the reform of equity division and exchange rate system,the decision of the Chinese stock prices and the RMB exchange rate begins return to marketization,and the correlation gradually emerges.The foreign exchange market and stock market are important parts of financial market.This paper analyzes the volatility spillover effect between the RMB exchange rate and Shanghai composite index,and on the basis ofmacroeconomics,informatively uses the SVAR model to study the relationship between RMB exchange rate and the Shanghai composite index in the whole macroeconomic system.It has an important significance for the macro management,policy-making for guarding against financial risk and promoting the steady development of financial market by considering the correlation between the two markets and applying the experience to other markets.In the first part,The background,significance,research ideas and the innovation of this paper are briefly introduced.Besides,the domestic and foreign literatures are analyzed respectively from the aspects of theory and empirical aspects of the comb,and the research status at home and abroad are commented.The theoretical analysis about the exchange rate and stock price relation of two traditional theory,namely the stock price traffic model impacted by exchange rate on and exchange rate stock oriented model impacted by stock prices,is done.In addition,the mutual transmission mechanism between exchange rate and stock price is analyzed in this part.Specifically,four exchange rate and stock price mutual transmission mechanisms are analyzed in detail.At first,exchange rate and stock price influence each other by interest rate.Secondly,Money supply acts as a transmission channel between the foreign exchange market and the stock market.Thirdly,the trade balance is the conduction intermediary between the exchange market and the stock market.And the international capital becomes the transmission channel between the two.In the third part,.And the analysis the closing price of RMB nominal effective exchange rate and Shanghai Composite Index is selected as the proxy variables of the RMB exchange rate and the Shanghai Composite Index.And the monthly date from July 22,2015 to November,2017 is collected to conduct an empirical analysis of the correlation between the RMB exchange rate and the Shanghai composite index in terms of statistical significance.The empirical results of the co-integration test and the error correction model shows that there is a long-term equilibrium relationship between the RMB nominal effective exchange rate and the Shanghai Composite Index.In the long term,the RMB nominal effective exchange rate will positively affect the Shanghai composite index.Short-term fluctuations of the stock market willhave an impact on short-term changes of the foreign exchange market.The above empirical test shows that there is a weak correlation between the RMB nominal effective exchange rate and the Shanghai Composite Index.In the fourth part,on the basis of macroeconomics,the internal economic ties model between the exchange rate and stock price is established.And the monthly data after the exchange rate reform in2005 is used,the macroeconomic variables such as the RMB exchange rate,the Shanghai composite index and interest rates are added to SVAR model.Besides,an empirical analysis of the internal economic ties between RMB exchange rate and the Shanghai composite index is made.More importantly,the empirical test results confirms the correlation between the RMB nominal effective exchange rate and the Shanghai composite index of the third part once again.In addition,it also shows that it is not smooth to take the interest rates and money supply as the transmission channels between the RMB nominal effective exchange rate and the Shanghai composite index.The last part is the summary of the preceding paper.It not only puts forward relevant suggestions from market development,but also puts forward some macro-management suggestions from the perspective of financial stability.