Research on the Fluctuation Relationship between Interest Rate, Exchange Rate and Stock Price

DATE PUBLISHED
June 2, 2018
SECTION
Articles

Abstract

From the very beginning, this article makes a brief exposition of the relationship and the transmission mechanism between interest rate, exchange rate and stock price. As to the empirical part, we establish the TVP-SV-VAR model to figure out the correlation between the interest rates, exchange rates, and stock prices by using the monthly data from July, 2005 to December, 2017 in China. The results show that the volatility of the stock price under the impact of interest rate has time-varying features and structural changes, the volatility of the exchange rate has time-varying features under the influence of stock index variables, and the Shanghai Composite Index has time-varying features under the impact of exchange rate, but it has a less significant effect between with them. In conclusion, we analyze the reasons for this phenomenon by combining with the reality in China, and give some suggestions.

Keywords

Exchange Rate; Interest Rate; Stock Market; TVP-SV-VAR model

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Author Details

Caihong Jiang

  • School of Statistics and Applied Mathematics, Anhui University of Finance and Economics, Bengbu 233030, China
  • Google Scholar
  • RAJAR Journal