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Synthesization of macroeconomic policies and stock return synchronicity: Evidence from countries along the Belt and Road Initiative

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  • Xie, Haixia
  • Sha, Yezhou
  • Li, Lingyi

Abstract

This study investigated the impact of macroeconomic policy changes in China on the stock markets of its Belt and Road Initiative (BRI) partners, whose economies have significant spillover effects. This topic is critical, because the BRI is a pivotal regional cooperation framework, which substantially influences economic dynamics and trade expansion across participating countries. We studied 47 countries from 2006 to 2021, and found a positive relationship between the effectiveness of macroeconomic policies and stock return synchronicity in BRI countries. We also explored monetary and fiscal policies and discovered that increased policy intensities correlate with higher synchronicity in BRI stock markets. Additionally, the benefit of macroeconomic policies was more pronounced in countries with closer trade ties and greater policy coordination with China. Further investigation showed that during periods of increased economic policy uncertainties within China and globally, the increase of stock return synchronicity is more pronounced.

Suggested Citation

  • Xie, Haixia & Sha, Yezhou & Li, Lingyi, 2024. "Synthesization of macroeconomic policies and stock return synchronicity: Evidence from countries along the Belt and Road Initiative," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
  • Handle: RePEc:eee:pacfin:v:85:y:2024:i:c:s0927538x24001495
    DOI: 10.1016/j.pacfin.2024.102398
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    More about this item

    Keywords

    Synthesization of macroeconomic policies; Belt and Road Initiative; Stock return synchronicity;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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