Characteristics of RMB Internationalization and Stock Market Co-movement Between China and RCEP Countries: An Analysis Based on Kernel PCA and SV-TVP-SVAR Model

Ke Huang (), Zuominyang Zhang () and Yakun Wang ()
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Ke Huang: Nanning University
Zuominyang Zhang: Guangxi University
Yakun Wang: Nanning University

Computational Economics, 2025, vol. 65, issue 6, No 29, 3945-3969

Abstract: Abstract This paper uses the stock market indexes of RCEP member countries, and uses the relatively novel kernel PCA method in machine learning to improve the stock market absorption rate index (Kernel PCA Absorption Ratio, KAR index), which can describe the co-movement and changing characteristics of the stock indexes of various countries. Further, we study the impact of the deepening of RMB internationalization on the degree of co-movement in the stock markets of RCEP member countries. The study found that a sharp rise in the KAR index, which reflects the level of co-movement, often indicates that the stock markets of RCEP countries are about to fall sharply. After a sharp decline in the KAR index, it usually corresponds to a sharp rise in the stock market. The internationalization of the RMB has a significant impact on the co-movement of the stock markets of RCEP countries. The higher the degree of RMB internationalization, the lower the coordination between China and RCEP member countries, reflecting that the RMB acts as a “stabilizer” in the process of being accepted by the international market. In the short term, when the degree of RMB internationalization decreases, the synergy between the stock markets of China and RCEP countries will increase, and the systemic risks will converge and the impact will persist. The findings of this paper have important implications for monitoring systemic risk management in transnational stock markets and risk hedging in transnational portfolios.

Keywords: RCEP Countries; RMB Internationalization; Stock Market; Machine Learning (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10614-024-10691-5

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