Analysis of Comovements between Exchange Rates and Stock Prices:The case of China and Japan
With the lifting of the restrictions on the exchange rate and capital flows,the exchange rate between a country and the stock market presents a linkage.On the basis of theoretical analysis of the transmission mechanism of interest rate as the core intermediary factor, the empirical analysis shows that there is a negative correlation between the exchange rate and the stock price.In the long run,China's Shanghai composite index is the Granger reason for exchange rate movements.Drawing on the experience of Japan,we should not only see the positive effect of moderate appreciation of RMB on the stock market price,but also pay more attention to the serious consequences of the stock market bubble burst.China can take a gradual reform of the exchange rate reform, adhere to the initiative, controllability and gradual,according to changes in the international and domestic economic situation timely and appropriate, and gradually improve the exchange rate mechanism,strict control of abnormal capital inflow,and strengthen the market supervision,to create an open,fair and transparent securities market, provide a a market system foundation for the internationalization of RMB in the future.
