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Asymmetric Effects of Chinas Monetary Policy on the Stock Market: Evidence from a Nonlinear VAR Mode

Yunpeng Sun and Xueying Wang
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Yunpeng Sun: Subject Group of Economics and Finance, Portsmouth Business School, University of Portsmouth, Portsmouth PO1 3DE, Hampshire, United Kingdoms
Xueying Wang: Subject Group of Economics and Finance, Portsmouth Business School, University of Portsmouth, Portsmouth PO1 3DE, Hampshire, United Kingdoms

Asian Economic and Financial Review, 2018, vol. 8, issue 6, 745-761

Abstract: This study uses Markov switching vector autoregression (MS-VAR) model to explore the asymmetric effects of China?s monetary policy on the stock market in the bull market and the bear market. With China?s economy in a rapid development, China?s stock market as the main representative of the virtual economy has attracted large assets. Since 1990 to the present, China?s stock market has experienced several times states? change between the bull market and bear market. The results indicate that China?s quantity-based direct instrument and price-based indirect instrument have asymmetric effects on the stock market in the bull market and the bear market. Moreover, the relationship between China?s economy and stock market exist a degree of dichotomy. Furthermore, China?s monetary policy has stronger effects on the bull market than the bear market.

Keywords: Chinas monetary policy; Chinas economy; Stock market; Bull market; Bear market; Quantity-based direct monetary instruments; Price-based indirect monetary instruments; Asymmetric effects; MS-VAR model. (search for similar items in EconPapers)
JEL-codes: E52 G10 C50 G12 (search for similar items in EconPapers)
Date: 2018
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