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

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  • Yunpeng Sun
  • Xueying Wang

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.

Suggested Citation

  • Yunpeng Sun & Xueying Wang, 2018. "Asymmetric Effects of Chinas Monetary Policy on the Stock Market: Evidence from a Nonlinear VAR Mode," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(6), pages 745-761.
    • Handle: RePEc:asi:aeafrj:v:8:y:2018:i:6:p:745-761:id:1708
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    Citations

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    Cited by:

    1. Lin Zhu & Jian He, 2024. "China financial stability and asymmetric implications for economic stability," Economic Change and Restructuring, Springer, vol. 57(1), pages 1-29, February.
    2. Djoko Roespinoedji & Roeshartono Roespinoedji & Mohammed R.A. Siam & Mohd Farid Shamsudin, 2019. "An Empirical Study on Short Term and Long-term Consequences of Crude Oil on Economic Wellbeing of Indonesia by Applying Autoregressive Distributed Lag Model," International Journal of Energy Economics and Policy, Econjournals, vol. 9(5), pages 474-480.
    3. Deng, Chuang & Zhao, Xiuyi & Xu, Man, 2022. "Financial cycle and the effect of monetary policy," Finance Research Letters, Elsevier, vol. 47(PA).
    4. Jiranyakul, Komain, 2018. "Regime Changes in the Relationship between Stock Market Return and the Growth Rates of Output and Money Supply in Thailand," MPRA Paper 89271, University Library of Munich, Germany.

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