Empirical Research On The Linkage Effect Of China's Foreign Exchange Market And Stock Market Under The Background Of Sino-US Trade Friction

With the continuous advancement of economic globalization and economic integration,China's exchange rate policy and A-share market rules have undergone major changes that RMB becomes more and more flexible,the scale of overseas capital investment in A-shares continues to expand,and the A-share market becomes more and more volatile.Since 2016,the U.S.government has proactively provoked trade disputes between China and the United States on many occasions,imposing tariffs and restricting investment,and the Sino-U.S.trade friction has continued to deepen.The Sino-US trade dispute is a selfish and self-serving act of local protection,which is inconsistent with the development consensus of economic and financial globalization,and will undermine the economic and financial stability of relevant countries.At present,it is a critical period for the continuous improvement and vigorous development of China's financial system.Trade frictions may hinder the original Chinese economic order and even the global economic order.Therefore,trade frictions have become a hot research topic in the financial academic circle.Through measuring the internal connection and mutual influence between the exchange rate and A-share price fluctuations,this research hopes to help the Chinese government adopt active and effective monetary policies and financial measures in the face of possible future trade frictions,and protect the internal stability and external balance of financial system.This article followed the research path of "literature review(discovering problems)-basic theoretical research(analyzing problems)-financial model construction-empirical testing(answering questions)".Relying on the specific current event background of Sino-US trade friction,this research utilized the classic theory of exchange rate and stock price transmission,combined with major events that occurred in different time periods,to descriptively analysis and predict the correlation between exchange rate and stock price.Then,regarding the Wind World A Index(881001)and central parity rate of USD/RMB as variables,a structural vector autoregressive model was constructed to measure the dynamic effects and internal connections between variables.The major steps included stationarity test,granger causality test,impulse response,variance decomposition,etc.Analysis results showed that no matter before or after the Sino-US trade friction,there was no cause-and-effect correlation between exchange rate and A-share stock price fluctuations.But the impact linkage between them became more obvious after the Sino-US trade friction,with more significant linkage relationship,greater investors' mood swings and investment behaviors changed accordingly.It can be seen that when necessary,moderate intervention in the capital account and current account is necessary to help protect China's financial system from the impact of overseas financial storms and generate systemic financial risks.The financial regulatory authorities should strengthen exchange rate reformation and emphasis the moderate implementation of floating exchange rate management policies,in order to maintain the freedom and stability of the exchange rate market,and help it form an endogenous risk adjustment mechanism.