Abstract
This study examines the relationship between Chinese renminbi (RMB) exchange rates and Chinese stock prices over the full study period of 20 July 2001 to 21 July 2011. The study also investigates the relationship between the exchange rate and ten industry-specific indices. Also examined is the effect of two specific events on the ‘exchange rate/stock price’ relationship: (1) the easing of exchange rate controls, and (2) the 2008 start of the global financial crisis. A long-run cointegration relationship is found during the full study period between exchange rates and the Shanghai A-share prices, and for nine of ten industry indices. Granger causality in one direction (i.e., from exchange rates to stock prices, or vice versa) or both directions is found for four of the industry-specific indices. Interestingly, both a long-run cointegration relationship and Granger causality are only found during the most volatile period of managed exchanged rates before the global financial crisis. Implications for Chinese monetary policy makers and global investors are provided.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
