Exchange Rate Shocks and the Volatility of Stock Prices in China
Liu Yongming;Gan Yongchun;
Based on daily data of RMB exchange rate and CSI300 index from June 17, 2010 to Jan 5,2016, this paper analyses the casual relationship and volatility spillover effects between RMB exchange rate and CSI300 index. We find there is no cointegration relationship. RMB exchange rate has a significant leading role on price, but CSI300 index only has a weak leading role on RMB exchange rate. This proves that the relationship between RMB exchange rate and CSI300 index would be flow-oriented. Besides, CSI300 index has a one-way volatility spillover effect on the RMB exchange rate. The risk of the stock market is easy to spread to the foreign exchange market. We suggest that China should further improve the pricing efficiency of the RMB exchange rate and the stock market. At the same time, China should coordinate the exchange rate policies and domestic fiscal and monetary policies to prevent financial risks.
【CateGory Index】： F832.51;F832.6