Gain or Loss from this Turn’s Rate Hike: Evidence from Tesla and USD Index

Abstract

A series of grave problems caused by energy scarcity and environmental pollution have gradually become the focus of governments and automobile manufacturers, and all countries agree that energy saving, and emission reduction are the inevitable directions of the future development of industrial automobile technology. As a global pioneer of new energy pure electric vehicles, Tesla has created a new concept of using Internet thinking to produce cars. At the same time, under the influence of the epidemic disturbance and the conflict between Russia and Ukraine, the supply and demand of global commodities such as crude oil and grain are tense. In addition, the Fed has raised interest rates for three rounds since June 2022, leading to rising inflationary pressure in the global market. Rising cost pressure in industries with a high degree of global value chain integration (such as automobiles, batteries, and mechanical equipment) and Tesla's earnings are also affected by exchange rate fluctuations. This paper uses the VAR model to explain the dynamic relationship between the exchange rate of USD/offshore RMB and Tesla stock price, establishes the ARMA-GARCH model to predict and analyze how the change of exchange rate affects the volatility of Tesla stock returns, and predicts the impact on industrial enterprises like Tesla.