Author(s)

Jinying Xie

Corresponding Author

Jinying Xie

ABSTRACT

This paper examines the causal relationship between RMB exchange rates and stock prices during the Sino US trade war. We analysis the goods market hypothesis and portfolio balance approach, then the representative transmission mechanisms are detailed analyzed. The empirical analysis is carried on by getting the daily data of the intermediate rate of RMB against US dollar and Shanghai Composite Index for the period March 23, 2018 to January 17, 2020. The empirical result shows there is not co-integration between them but co-integration between the return rate of them, and a causal relation from stock yield to return rate of exchange. The findings are supported by various testing methods, including Granger causality tests, impulse response, and variance decomposition analysis.

KEYWORDS

Intermediate rate of RMB against US dollar, Shanghai composite index, granger causality test