Abstract
This paper studies the dependence structure and information spillover effect between the RMB exchange rate and the Chinese stock market based on the R-vine copula model and spillover index model. The results show that due to the occurrence of the trade war, the correlation between the three RMB exchange rate indicators and the two stock market indicators increases in varying degrees. In the intensity of spillover, the information spillover of the stock market to the RMB exchange rate is significantly enhanced, and the information spillover intensity of the RMB Index to the stock market increases, but the information spillover of the US dollar and Hong Kong dollar exchange rates to the stock market is significantly weakened. In the direction of spillover, the spillover of the RMB Index and stock market shows the characteristics of alternating transformation, while the exchange rate of a single currency and the stock market shows a one-way transmission from the stock market to the exchange rate. Additionally, the information spillover between the RMB exchange rate and the stock market is closely related to the degree of market openness. The RMB Index contains more information than the exchange rate of a single currency.
Highlights
With the financial globalization and complex environment, the RMB foreign exchange market fluctuates abnormally and the Chinese stock market fluctuates violently and the exchange rate market fluctuates frequently
China’s economy has suffered as a result of the successful implementation of supply-side reforms and financial deleveraging. e current economy has gradually recovered, but there is still a huge difference compared with the launch of the US tax reform policy and the full recovery of the economy. e serious economic differentiation between the two countries has led to the fluctuation of the RMB exchange rate to a certain extent
Regarding the Sino-US trade war as a typical shock, this paper studies the correlation and information spillover effects between the RMB exchange rate and stock markets to show the dynamic changes of their relationship. e process of domestic exchange rate system reform and RMB internationalization has improved the degree of marketization and openness of the exchange rate, and its relationship with the stock market is becoming more and more complex
Summary
With the financial globalization and complex environment, the RMB foreign exchange market fluctuates abnormally and the Chinese stock market fluctuates violently and the exchange rate market fluctuates frequently. Regarding the Sino-US trade war as a typical shock, this paper studies the correlation and information spillover effects between the RMB exchange rate and stock markets to show the dynamic changes of their relationship. Based on the above two methods, this paper describes the interdependence and information spillover structure between the RMB exchange rate and the stock market during the Sino-US trade war and draws reliable research conclusions.
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