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Linkages between the Chinese stock market and the macroeconomic climate in the U.S. and EU

Ekman, Gabriel LU and Månsby, Petter LU (2018) NEKN03 20181
Department of Economics
Abstract
The purpose of this paper is to examine the relationship between investments in the Chinese stock market and shocks to the macroeconomic climate in the U.S. and in the EU. Four different indices are used in determining the investment response to shocks in the two different geographical regions of interest – The Shanghai Composite Index, CSI 300 Information Technology Index, CSI 300 Materials Index, and CSI 300 Industrials Index – with the first being a broader index and the three latter being a sector-specific index. Each index is investigated in relation to imports, central bank short-term interest rate, industrial production, and inflation, for both the U.S. and EU using a vector autoregressive (VAR)
methods such as causality, variance... (More)
The purpose of this paper is to examine the relationship between investments in the Chinese stock market and shocks to the macroeconomic climate in the U.S. and in the EU. Four different indices are used in determining the investment response to shocks in the two different geographical regions of interest – The Shanghai Composite Index, CSI 300 Information Technology Index, CSI 300 Materials Index, and CSI 300 Industrials Index – with the first being a broader index and the three latter being a sector-specific index. Each index is investigated in relation to imports, central bank short-term interest rate, industrial production, and inflation, for both the U.S. and EU using a vector autoregressive (VAR)
methods such as causality, variance decomposition, and impulse response functions. The
results suggest that out of the four variables, import and inflation are the most significant variables in terms of their transmissive effects on the Chinese stock markets. The effect of the central bank rates and industrial production are significantly smaller and cannot be claimed to explain Chinese stock variations, at least in the context of this model and data set. This paper provides insights for investors looking to invest in the Chinese stock market and for policymakers operating within a Chinese context. (Less)
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author
Ekman, Gabriel LU and Månsby, Petter LU
supervisor
organization
course
NEKN03 20181
year
type
H1 - Master's Degree (One Year)
subject
keywords
VECM, Impulse Responses, Variance Decomposition, Chinese stock market, macroeconomic linkages, finacial integration
language
English
id
8944925
date added to LUP
2018-07-03 14:19:56
date last changed
2018-07-03 14:19:56
@misc{8944925,
  abstract     = {{The purpose of this paper is to examine the relationship between investments in the Chinese stock market and shocks to the macroeconomic climate in the U.S. and in the EU. Four different indices are used in determining the investment response to shocks in the two different geographical regions of interest – The Shanghai Composite Index, CSI 300 Information Technology Index, CSI 300 Materials Index, and CSI 300 Industrials Index – with the first being a broader index and the three latter being a sector-specific index. Each index is investigated in relation to imports, central bank short-term interest rate, industrial production, and inflation, for both the U.S. and EU using a vector autoregressive (VAR)
methods such as causality, variance decomposition, and impulse response functions. The
results suggest that out of the four variables, import and inflation are the most significant variables in terms of their transmissive effects on the Chinese stock markets. The effect of the central bank rates and industrial production are significantly smaller and cannot be claimed to explain Chinese stock variations, at least in the context of this model and data set. This paper provides insights for investors looking to invest in the Chinese stock market and for policymakers operating within a Chinese context.}},
  author       = {{Ekman, Gabriel and Månsby, Petter}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Linkages between the Chinese stock market and the macroeconomic climate in the U.S. and EU}},
  year         = {{2018}},
}