Research On The Linkage Between The RMB Exchange Rate And Chinese Stock Price

In July 2005,China conducted the market-oriented reform of the RMB exchange rate,then the elasticity and amplitude of the exchange rate increases.At the same time,the rapid development of the domestic stock market,stock trading has been increased dramatically and stock pr:ice has been fluctuated sharply.Short-term international capital flowing is also very significant.These phenomena are threaten to the whole financial market.The previous market experience at home and abroad show that there is a link between the exchange rate market,the stock market,and short-term international capital flows.Therefore,in this paper,based on the perspective of short-term international capital flows,we research what is the linkage relationship between the RMB exchange rate and Chinese stock market price?Furthermore,does capital flows play a role in the linkage of the two?And how does it play a role?According to the characteristics of dynamic change between the three economic variables,this paper constructs the IS-LM-BP model in the open economy and deducts the transmission mechanism.In addition,it sets up TVP_VAR model,using the monthly data from June 2010 to December 2017,to explore the nonlinear relationship between the RMB exchange rate,short-term international capital flows,and the three types of stock price index.The empirical results show that:First,the impulse response function model has time-varying characteristics.The fluctuation of exchange rate has a positive impact on the stock price index changes with lagging.The impact of the stock index impact on the exchange rate and short-term international capital flows includes both positive and negative effects.And the impact of the stock index impact is characterized by stages.Second,short-term international capital flows is the transmission factor between these three,which has a direct and indirect impact on the conduction process.Third,in the short run,the effect of effective exchange rate on international capital flows has only one-way remarkable relationship.And the reverse effect is not remarkable.There is no long-term relationship between them.Fourth,in different stock market,the influence trend of stock market index,short-term international capital flows?and exchange rate is consistent.But there are differences in the effectiveness and degree of response.Finally,based on the research results,we put forward relevant policy recommendations in terms of capital flows regulation,stock market construction,exchange rate mechanism reform and multi-market integrated control.