SHIBOR Fluctuations and Stock Market Liquidity: An MF-DCCA Approach

Xuemei Yuan, Yihong Sun and Xinsheng Lu

Emerging Markets Finance and Trade, 2022, vol. 58, issue 7, 2050-2065

Abstract: This paper examines the nonlinear and dynamic cross-correlations between SHIBOR and Chinese stock market liquidity by employing MF-DCCA method. The cross-correlations display weak persistence and multifractal characteristics, explaining the variations in the relationship between them. The multifractality strength of the cross-correlations decreases after a recent liberalization reform. Moreover, interest rates have a significantly strong influence on stock market liquidity during tight monetary policy and emergencies, indicating the asymmetric and time-varying impact of interest rates on stock market liquidity. In addition, the effectiveness of interest rate transmission decreases in the period of the COVID-19 pandemic.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:58:y:2022:i:7:p:2050-2065

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DOI: 10.1080/1540496X.2021.1954503

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