Study On The Spillover Effect Of Exchange Market And Capital Market To Real Economy In China

Hu Jintao talks about "financial market" and other issues many times during the G20financial summit in November,2008. He points out that "the international finance crisis spreads unceasingly as present, it has been penetrating from fictitious economy to real economy specially" when discussing with British Prime Minister Brown. So, the financial market has been one important part of modern society, whether the financial market is coordinated with real economy will influence the whole national economy directly. In the new situation of international economic development, there is great significance for maintaining the national economy stablity and healthy development based on processing the relationship between financial market and real economy correctly, promoting coordinated development of financial market and real economy, playing the role of promoting real economy growth with the healthy development of financial market effectively.The exchange market and capital market has great impact on the real economy as the important part of financial market. So in this dissertation, we use VAR(2)-MGARCH(1,1)-BEKK model with four variables to analyze the spillover effect of exchange market and capital market (stock market and bonds market) to real economy based on the monthly data in china in the frame with the two market. We integrate the development of financial market and real economy on the basis of theoretical analysis of the coordinated development mechanisms of financial market and the real economy in China, and we use related distinguishing methods to analyze the coordination state of financial market and real economy in China meanwhile. The empirical results show that there are significantly the mean and volatility spillover effect of exchange market and capital market to real economy, and that the spillover effect of stock market to real economy is the most significant, followed by the bonds market, and the exchange market is final. Based impulse response and variance decomposition, the results show that capital market gives more and longer impact on the real economy than exchange market in China and that stock market gives more and longer impact on the real economy than bond market in China. The capital market has high correlation degree with the real economy than exchange market in China, and stock market has high correlation degree with the real economy than bond market in China in general. There is no doubt that the financial market volatility is important to the steady development of the real economy based on the analysis of this thesis, especially stock market volatility. So we need accelerate the pace of reform and opening space of our country’s financial markets to improve the exchange rate formation mechanism, and in order to serve the real economy services better.