Dissertation > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Exchange rate,foreign financial relations

The Research for the Affect of RMB Exchange Rate Expectation to Asset Price Based on DSGE Model

Author GengJunQiong
Tutor WangYaJie
School Harbin Institute of Technology
Course Finance
Keywords DSGE model RMB exchange rate expectation asset price
CLC F832.6
Type Master's thesis
Year 2013
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After exchange rate regime reform in China,the dual account has beenappearing surplus state.There exits appreciation pressure on Chinese exchange ratefrom abroad,which causes RMB real exchange rate continues appreciation.Theexpectation of RMB exchange rate continues appreciation state.With the massiveinflux of international hot money,the Chinese capital market,especially stockmarket,keeps fluctuating.Based on the background,this paper establishestwo-countries DSGE model to research the affect of RMB exchange rateexpectation to Chinese capital market,and to research the way of how exchangerate expectation affects asset price.This paper establishes three-departments and two-countries DSGEmodel.Three departments are family department,firm department and goventmentdepartment.The goal of family department is utility maximization under variouskinds of constraints.This paper adds exchange rate expectation constraint totraditional MIU model.Because of the difference between current exchange rateand forward exchange rate,exchange rate expectation exists somedefference,which is produced by two expectations with different period(inferenceexpectation and expectes expectation).The goal of firm department is profitmaximization under cost constraint.Considering the affect of inflation to pricestickness,this paper adds price correction condition decided by total inflationrate.Government department formulates fiscal and monetary policy,maintainsmacroeconomic equilibrium.This paper adds exchange rate impact factor to themodel,to discuss the affect of exchange rate shock to capital price.This paper chooses Shanghai Composite Index as the representative variableof asset price,conducts empirical analysis using Chinese real data,discusses theaffect of exchange rate expectation to Shanghai Composite Index undernon-variable intervening and existing variable intervening separately,andcompares to the Chinese real situation.The result believes that under the conditionof variable intervening,the affect of exchange rate expectation to Shanghai Composite Index is nearest to Chinese real situation,explans the volatile situationof Chinese stock market under exchange rate appreciation expectation,andanalyzes the reason of the situation,which believes the affect of exchange rateexpectation to Shanghai Composite Index is through various kinds ways includingprice way,interest rate way,wage way and money supply way.At last,combining theresult of empirical analysis,this paper proposes some proposal to Chinese capitalmarket macro regulation under pressure of RMB exchange rate appreciationexpectation.

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