The Research Of The Rmb Exchange Rate And Stock

China carried out a major reform of exchange rate regimes and stock markets at the same time in2005. After the reform, based on market supply and demand, the RMB exchange rate refers to a basket of currencies and forms a managed floating exchange rate system. In this way, RMB exchange rate put the era of relying on the single US dollar into an end. It is true that the formation of a more flexible RMB exchange rate mechanism and the stock market liquidity enhancement come into being. The relationship between China’s foreign exchange and stock markets has been a topic of academic concern for a long time. So under the background of the current pressure of RMB appreciation, studying the impact between exchange rates and stock prices is of great importance to prevent the financial market shocks caused by appreciation of the RMB exchange rate fluctuations.This paper first reviewed the researches at home and overseas on the relationship between stock prices and exchange rates, mainly introducing the flow-oriented model and stock-oriented model. Then this paper analyses the way of transduction information between the exchange rate and stock prices. Chapter three and chapter four presents an empirical study to investigate the volatility effects of the price and return rate between exchange markets and stock markets. In the study process, this paper analyses the relationship from aspect of the first-order moments and second moment by adopting a VAR model, cointegration test, Granger causality test, impulse response functions and multi-BEKK-GARCH model.The results show that:there is not a long-term dynamic relationship between the exchange rate and the Shanghai A share. Granger causality test shows that there is a two-way Granger causal relationship between the exchange rate and stock price on1%significance level. In another word, the exchange rate is the Granger cause of stock price, while the stock price is also the Granger cause of the exchange rate. The fluctuations of exchange rate have a great impact on the stock price, while stock price volatility has a small effect on the RMB exchange rate. There is the volatility spillover effect in the stock market and foreign exchange market, but the spillover effect is asymmetric and one-way. What’s more, there exist the unidirectional volatility spillovers effects between stock and exchange markets, indicating the past innovations in exchange market have the great effect on future volatility in stock market, and not vice versa. Finally, in the light of the empirical conclusions, the author puts forward some policy proposals on exchange rate system and the stock market.