Do Macroeconomic Structural Changes Occur in China's Stock Markets?

Jen Sin Lee (), Shyan-Rong Chou, Gow-Liang Huang and Chin-Tai Kuo
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Jen Sin Lee: Department of Finance, I-Shou University, 1, Section 1, Syuecheng Rd., Dashu Township, Kaohsiung County, 840, Taiwan
Shyan-Rong Chou: Department of Financial Operations, National Kaohsiung First University of Science and Technology, 2, Juoyue Rd., Nantz District, Kaohsiung, 811, Taiwan
Gow-Liang Huang: Department of Financial Operations, National Kaohsiung First University of Science and Technology, 2, Juoyue Rd., Nantz District, Kaohsiung, 811, Taiwan
Chin-Tai Kuo: Doctoral Program in Management, National Kaohsiung First University of Science and Technology, 2, Juoyue Rd., Nantz District, Kaohsiung, 811, Taiwan

Asian Academy of Management Journal of Accounting and Finance (AAMJAF), 2008, vol. 4, issue 1, 1-21

Abstract: Using a rolling regression approach with varying independent variables, this paper investigates macroeconomic structural changes in the four main stock markets in China and identifies the threshold values of structural changes. Macroeconomic structural changes frequently occur on the Shanghai stock exchange, but only rarely on the Shenzhen stock exchange. In addition, five vertical threshold values are identified for the rate of change in the exchange rate (0%), the rate of change in the consumer price index (25.6%), the rate of change in the industrial production (13.5% and 15%), and the interest rate (10.98%). These threshold values imply that the effect of fluctuations in the renminbi on China's stock markets might be contingent upon different rates of change in the exchange rate, in the consumer price index, in the industrial production, and in the interest rate. Moreover, greater economic growth is not always reflected in the prosperity of the stock market. Higher growth in the price level may have a negative rather than a positive impact on economic growth.

Keywords: macroeconomic factors; structural change; economic growth; exchange rate JEL Classifications: (search for similar items in EconPapers)
Date: 2008
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