Do the Chinese Bourses (Stock Markets) Predict Economic Growth?

Jeffrey Jarrett (), Xia Pan and Shaw Chen
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Xia Pan: Lingnan College, Sun Yat-sen University, Guangzhou, China
Shaw Chen: Faculty of Management Science and Finance, University of Rhode Island, U.S.A.

International Journal of Business and Economics, 2009, vol. 8, issue 3, 201-211

Abstract: We study the relationship between the Chinese macroeconomy and the Chinese stock markets, i.e., the bourses in Shanghai and Shenzhen. With this goal, we utilize multiple Granger causality and Geweke linear dependence and examine likelihood ratio statistics between two sectors of the Chinese economy: the Chinese economic prosperity score (EPS)¡Xand its departure from a "healthy level" (EPS-D)¡Xand composite indexes for Chinese securities markets¡XShanghai composite (SH) and Shenzhen composite (SZ). The data cover nine years. The authors found no evidence that SH and SZ Granger cause economic prosperity. The evidence supports the notions that Chinese stock markets respond greater to changes in EPS-D than to EPS and that the SZ is more sensitive to changes in the economy than the SH.

Keywords: Granger causality; Geweke linear dependence; likelihood ratio tests; vector autoregression (search for similar items in EconPapers)
JEL-codes: F21 G15 G17 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (2)

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