Do the RMB exchange rate and global commodity prices have asymmetric or symmetric effects on China’s stock prices?

Shaobo Long (), Mengxue Zhang (), Keaobo Li () and Shuyu Wu ()
Additional contact information
Shaobo Long: Chongqing University
Mengxue Zhang: Chongqing University
Keaobo Li: Tsinghua University
Shuyu Wu: Beijing Normal University

Financial Innovation, 2021, vol. 7, issue 1, 1-21

Abstract: Abstract With the rapid expansion of the RMB exchange rate’s floating range, the effects of the RMB exchange rate and global commodity price changes on China’s stock prices are likely to increase. This study uses both auto regressive distributed lag (ARDL) and nonlinear ARDL (NARDL) approaches to explore the symmetric and asymmetric effects of the RMB exchange rate and global commodity prices on China’s stock prices. Our findings show that without considering the critical variable of global commodity prices, there is no cointegration relationship between the RMB exchange rate and China’s stock prices, and the coefficient of the RMB exchange rate is not statistically significant. However, when we introduce global commodity prices into the NARDL model, the result shows that the RMB exchange rate has a negative effect on China’s stock prices, that there indeed exists a long-run cointegration relationship among the RMB exchange rate, global commodity prices, and stock prices in the NARDL model, and that global commodity price changes have an asymmetric effect on China’s stock prices in the long run. Specifically, China’s stock prices are more sensitive to increases than decreases in global commodity prices. Thus, increases in global commodity prices cause China’s stock prices to decline sharply. In contrast, the same magnitude of decline in global commodity prices induces a smaller increase in China’s stock prices.

Keywords: RMB exchange rate; Global commodity prices; China’s stock prices; Asymmetric effects (search for similar items in EconPapers)
JEL-codes: F3 G1 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://link.springer.com/10.1186/s40854-021-00262-0 Abstract (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:fininn:v:7:y:2021:i:1:d:10.1186_s40854-021-00262-0

Ordering information: This journal article can be ordered from
http://www.springer. ... nomics/journal/40589

DOI: 10.1186/s40854-021-00262-0

Access Statistics for this article

Financial Innovation is currently edited by J. Leon Zhao and Zongyi

More articles in Financial Innovation from Springer, Southwestern University of Finance and Economics
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().