外文翻译人民币升值对股价的影响.docx

外文翻译人民币升值对股价的影响.docx

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外文翻译人民币升值对股价的影响

中文3300字

本科毕业论文外文原文

外文题目：

TheImpactofRenminbiAppreciationonStockPricesinChina

出处：

EmergingMarketsFinance&Trade

作者：

Chien-ChungNiehandHwey-YunYau

ABSTRACT:

SinceremovalofthepeginJuly2005,Chinahasenteredaneweraofamanagedfloatingexchangeratesystem.AlthoughmanyobservershaveraisedconcernsabouttheimpactofsuchapolicychangeonChina’stradesurplus,lessattentionhasbeenpaidtoitseffectsonfinancialmarkets.ThispaperinvestigatestheimpactofrecentrenminbiappreciationonstockpricesinChinasinceremovalofthepeg,usingthresholdcointegrationandmomentumthresholderror-correctionmodel（M-TECM）.Theresultsclearlyillustratethatnoshort-runcausalrelationexists,andanasymmetriccausalrelationshiprunningfromtherenminbi/U.S.dollarexchangeratetoChineseShanghaiA-sharestockpricesinthelongrunisbasedonM-TECM.Policyandthebroaderimplicationsofthefindingsarediscussed.

KEYWORDS:

asymmetriccausality,exchangerates,momentumthresholderror-correctionmodel（M-TECM）,stockprices.

China’scurrency,therenminbi（RMB）,whichforthepreviousdecadewastightlypeggedatRMB8.28totheU.S.dollar,wasrevaluedtoRMB8.11perU.S.dollaronJuly21,2005.Followingremovalofthepeg,dueinparttopoliticalpressurefromtheUnitedStatesandtheUnitedKingdom,theChineseauthoritiesalsoannouncedthattherenminbiwouldbepeggedtoabasketofforeigncurrencies,ratherthanbeingstrictlytiedtotheU.S.dollar（USD）,anditwouldbeallowedtofloatwithinanarrow0.3percentdailybandagainstthisbasket.

TherevaluationoftheRMB/USDexchangeratehasmarkedaneweraofamanagedfloatingexchangeratesystem.Thesignificanceofexchangeratesystemreformisthattheshifttoaflexibleexchangerateregime,especiallytheadoptionofacurrencybandthatreferstoabasketofcurrencies,providesthemonetaryauthoritieswithacertaindegreeoffreedominimplementingpolicies.Thenewsystemwouldmostlikelyactasacrawlingpeg,ratherthanbeingstrictlyfixed,allowingChinagreaterflexibilityeitherthroughadjustmentsinthecrawlingpegregimethathasinvolvedthebasketofcurrenciesorthroughreweightingofthebasket.Observershavefrequentlysuggestedthattheyuanisundervalued,oftenonthebasisofpurchasingpowerparityarguments（Cline2005;Goldstein2004;GoldsteinandLardy2006）,contributingtogrowinglargetradesurplusesandportfoliocapitalinflows.Asinvestment（bothdomesticandforeign）boomedin2003–4andinflationaccelerated,somearguedthatrapidRMBappreciationwouldbehelpfulindealingwiththeincreasingpressureofdomesticinflationontheeconomy（Frankel2007;McKinnon2006）.

However,itwasalsoarguedthatfurtherRMBappreciationmightbringasignificantdeclineinChina’sexports.Hence,Chinesepolicymakershavebeenfacingthedilemmaofchoosingbetweenthetwooptions（i.e.,RMBappreciationvs.depreciation）.Credible,gradualRMBappreciationisrecommendedasanalternativestrategy（seeKutanandTsai2007）.

Althoughmuchattentionhasbeenfocusedontradeflows,Chinesepolicymakersfaceasimilardilemmaintermsoftheimpactofexpectedrenminbiappreciationondomesticfinancialmarkets,inparticular,thestockmarket.Forinstance,iftheexchangerateappreciates,exportersarelikelytolosecompetitivenessoninternationalmarkets,causingadropinprofitsandhenceinstockprices.Ontheotherhand,depreciationoftherenminbiislikelytocauseimporterstolosecompetitivenessondomesticmarkets（consumersmaynotbeabletoafford“higherpriced”importedproducts）,causingadeclineinprofitsandhenceinstockprices.

Duetothemutualeffectsofexchangeratesonstockprices,theimpactofrecent

changesintherenminbiondomesticstockpricesisanimportantconcerninpolicycirclesandamonginvestors.ThepurposeofthispaperistoaddresstheseissuesandexaminewhetheranasymmetriccausalrelationshipexistsbetweentheRMB/USDexchangerateandstockpricessinceremovalofthepeg.

LiteratureReview

Theissueofwhetherstockpricesandexchangeratesarerelatedhaslongbeenstudied.Twomajortheories,thetraditionalandportfolioapproaches,areappliedtotestthedynamicrelationshipbetweenexchangeratesandstockprices.Thetraditionalapproacharguesthatadepreciationofdomesticcurrencymakeslocalfirmsmorecompetitive,whichleadstoanincreaseinexports,andconsequentlyraisesstockprices.Thetraditionalapproachimpliesthatexchangeratesleadstockprices.Theportfolioapproach,onthecontrary,arguesthatanincreaseinstockpricesinducesinvestorstodemandmoredomesticassetsandtherebycausesappreciationofthedomesticcurrency,whichimpliesthatstockpricesleadexchangerates.The“stock-oriented”modelofexchangeratesbyBranson（1983）viewstheexchangerateasservingtoequatesupplyanddemandforassetssuchasstocksandbonds.

Empiricalevidenceusingbothapproacheshasyieldednoconsensusonthevalidityofeithertheory.Forexample,Mok（1993）foundweakbidirectionalcausalitybetweenstockpricesandexchangerates,whileBahmani-OskooeeandSohrabian（1992）andNiehandLee（2001）arguedforbidirectionalcausalitybetweenstockpricesandexchangeratesintheshortrun,butnotinthelongrun.Inaddition,somestudiesfoundaweakornoassociationbetweenstockpricesandexchangerates（e.g.,BartovandBodnar1994;Fernandez2006;FranckandYoung1972）.

Morerecently,ithasbeensuggestedthatsomeofthemixedresultsmaybedrivenbyextensiveuseoflinearconventionaltime-seriesmethodologies,whichfailtoconsiderinformationacrossregions,andthusleadtoinefficientestimationsandlowertestingpower.Recentstudiesthereforeallowforanonlinearcausalrelationshipbetweenthetwovariablesandalsousethresholdcointegrationmethods,whichfurtherallowfornonlinearadjustmenttolong-runequilibrium（BalkeandFomby1997）.

Methodology

ThispaperemploysthresholdcointegrationtechniquesaselaboratedbyEndersandGranger（1998）andEndersandSiklos（2001）,whichextendtheresidual-based,two-stageestimationmethoddevelopedbyEngleandGranger（1987）.Thedifferencebetweenthemliesintheformulationoflinearityandnonlinearityfromtheirsecondstageofunit-roottests.ThenonlinearmodelofEndersandGranger（1998）andEndersandSiklos（2001）canbeexpressedas

Δμt=Itρ1μt-1+（1-It）ρ2μt-1+ΣγiΔμt-1+εt

Equation

（1）isbasicallyaregime-switchingmodel—athresholdautoregressive（TAR）modelofthedisequilibriumerror,wherethetestforthethresholdofthedisequilibriumerroristermedathresholdcointegrationtest.Theresultofrejectionofthenullhypothesisofρ1=ρ2=0impliestheexistenceofacointegrationrelationshipbetweenthevariables.

Thisenablesustoproceedwithafurthertestforsymmetricadjustment（i.e.,H0:

ρ1=ρ2）,usingastandardF-test.Whenthecoefficientsofregimeadjustmentareequal（symmetricadjustment）,Equation

（1）convergestheprevalentaugmentedDickey-Fuller（ADF）test.Rejectingboththenullhypothesesofρ1=ρ2=0andρ1=ρ2impliestheexistenceofthresholdcointegrationwithasymmetricadjustment.InsteadofestimatingEquation

（1）withtheHeavisideindicatordependingonthelevelofμt–1,thedecaycouldalsobealloweddependingonthepreviousperiod’schangeinμt–1.TheHeavisideindicatorcouldthenbespecifiedasIt=1ifDμt–1≥τandIt=0ifDμt–1≤τ.AccordingtoEndersandGranger（1998）,thismodelisespeciallyvaluablewhentheadjustmentisasymmetric,suchthattheseriesexhibitsmore“momentum”inonedirectionthantheother.Thismodelisthentermedamomentumthresholdautoregressive（M-TAR）model.TheTARmodelisusedtocaptureadeep-cycleprocessif,forexample,positivedeviationsaremoreprolongedthannegativedeviations.Ontheotherhand,theM-TARmodelallowsautoregressivedecaytodependonDμt–1.Assuch,M-TARrepresentationmaycapturesharpmovementsinasequence.AsthereisgenerallynopresumptionaswhethertousetheTARorM-TARmodel,therecommendationistoselecttheadjustmentmechanismbyamodelselectioncriterionsuchastheAkaikeinformationcriterion（AIC）ortheSchwarzBayesiancriterion（SBC）.

GrangerCausalityTests

Giventhethresholdcointegrationresults,wenextapplytheGrangercausalitytestsusingtheadvancedmomentumthresholderror-correctionmodel（M-TECM）.TheM-TECMisexpressedas

ΔYit=α+γ1Zt1+γ2Zt-t+ΣδiΔY1t-i+ΣθiΔY2t-i+νt

BasedonEquation

（2）,GrangercausalitytestsareemployedtoexaminewhetherallcoefficientsofDY1,t–iorDY2,t–iarejointlystatisticallydifferentfromzerobasedonastandardF-testorwhethertheγjcoefficientsoftheerror-correctiontermaresignificant.BecauseGrangercausalitytestsaresensitivetotheselectionoflaglength,applyingtheAICcriteriontodeterminetheappropriatelaglengths,wefindempiricallythatthelaglengthsofk1andk2equaltwo（i.e.,k1=k2=2）.Theresultsclearlyillustratethatnoshort-runcausalrelationshipexistsbetweenEXandCHStock（insignificanttorejectbothH0:

δ1=δ2=0andH0:

θ1=θ2=0）.Besides,therealsoexistsaunidirectionalcausalityrunningfromEXtoCHStockinthelongrun,whenthedifferenceinthepreviousdisequilibriumtermisabovethethresholdvalueof0.0048.（H0:

θ1=θ2=γ1=0isrejectedatthe10percentsignificancelevel.）Ontheotherhand,thenullhypothesesofδ1=δ2=γ1=0，δ1=δ2=γ2=0andθ1=θ2=γ2=0cannotberejected.Furthermore,thesignificantfindingrejectingthenullhypothesisofγ1=γ2inCHStockisconsistentwiththefindingofourpreviousM-TARTestimationsandreconfirmstheexistenceof