Research On The Interaction Among Hot Money,Exchange Rate And Stock Price

The C haracteristics of hot money are short-term,speculative,profit-driven,etc.In recent years,with the gradual opening of domestic capital accounts,the promotion of interest rate,exchange rate marketization,and the improvement of the stock market system,new changes had taken place in its scale,fluctuations,driving factors,and investment direction,and it had a great impact on the economic development of a country.At the same time,with the expansion of exchange rate fluctuations,maintaining stable and balanced exchange rate deve lopment will not only benefit domestic economic and financial reforms,but also contribute to international economic and financial stability.The stock market is the "barometer" of the national economy,so it must move toward a more mature,standardized,rational and open direction.In summary,this paper believes that studying the interaction among hot money,exchange rate and stock price in a new context is more conducive to the formulation of corresponding policies to steadily promote the development of domestic economy and finance.After reviewing the literature,the paper finds that the interaction among hot money,exchange rate and stock price will change due to different research backgrounds.The research background includes country,market opening de gree,capital control level,major events in the sample period,etc.Then,on the basis of observation and analysis of the status quo of them,using the VAR model to conduct an empirical study of the interaction among them.The study divides the research interval into two time periods from July 2005 to September 2008(first interval)and July 2010 to December 2017(second interval).The results show that the inflow of hot money in the first zone caused the appreciation of the currency,and the appreciation of the currency caused stock price fall.In the second interval of the sample,the rise in stock prices led to the outflow of hot money,which in turn triggered the devaluation of the currency.From the perspective of volatility,an empirical study using t he VAR model shows that an increase in stock price volatility will lead to an increase in exchange rate volatility,and an increase in exchange rate volatility will cause the stock price volatility to increase first and then decrease.Finally,it is proposed that the hot money monitoring system should be continuously improved,the cost should be increased,the emergency response mechanism should be improved,the reform of the exchange rate market and the stock market should continue to be promoted.