The Interrelationship Between Exchange Rates and Stock Prices:Evidence from China

摘要

This paper tries to investigate the relationship between RMB exchange rates and A-share stock prices in China, after the Exchange Rate Reform, on July 21, 2005. The econometric models applied are including the Unit Root Test, Engle-Granger Two-step Test and Granger-causality Test. The findings show some longterm cointegrating relationships between RMB exchange rates and stock market prices and there is a significant uni-directional causal relationship existing between Japanese Yen against RMB exchange rate and the A share stock prices.