The Linkage Effect and Market Reaction between the Fed’s Interest Rate Cutting Cycle and China’s Stock Markets

Zhiyuan Liu ()
Additional contact information
Zhiyuan Liu: Zhuhai College of Science and Technology, Finance and Trade Faculties

A chapter in Proceedings of the 2025 International Conference on Financial Risk and Investment Management (ICFRIM 2025), 2025, pp 617-627 from Springer

Abstract: Abstract This research centers on the effect of the Federal Reserve’s interest rate cuts on China’s stock market. Employing monthly data spanning from September 2016 to September 2022, it chooses variables such as the Shanghai Stock Exchange index, exchange rate, export volume, consumer price index, lending rate, and money supply. After conducting the Augmented Dickey-Fuller test and first-order differencing to ensure data stationarity, the optimal lag order for the VAR model is determined to be 1. The Granger causality test shows unidirectional causality among certain variables. Impulse response analysis indicates that short-term fluctuations of each variable notably influence the SSE index. It’s found that the Fed’s rate cuts have a short-term positive effect on China’s stock market, but the underlying mechanisms demand further exploration. Moreover, the VAR model has limitations, and both the data and methodology need refinement to enhance the accuracy and comprehensiveness of the analysis.

Keywords: Fed rate cut; Chinese stock market; VAR model; transmission mechanism; impulse response (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-748-9_69

Ordering information: This item can be ordered from
http://www.springer.com/9789464637489

DOI: 10.2991/978-94-6463-748-9_69

Access Statistics for this chapter

More chapters in Advances in Economics, Business and Management Research from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().