The relationship between inflation, monetary policy and stock returns: Evidence from China
(2021) NEKN02 20211Department of Economics
- Abstract
- This paper aims to study the relationship between inflation, stock returns and monetary policy. The basic conclusion is: through the single-equation analysis of the Fisher effect, it is concluded that there is a negative correlation between inflation and stock returns in China. By examining the relationship between stock returns, the real economy and monetary policy, we find that the expected change of real economy has no significant relationship with the expected stock returns and the increase of money supply growth rate will lead to the decline of the expected stock return rate in China. On this basis, a VAR containing four variables is used to provide further evidence for the role of inflation, stock returns and monetary policy. Then,... (More)
- This paper aims to study the relationship between inflation, stock returns and monetary policy. The basic conclusion is: through the single-equation analysis of the Fisher effect, it is concluded that there is a negative correlation between inflation and stock returns in China. By examining the relationship between stock returns, the real economy and monetary policy, we find that the expected change of real economy has no significant relationship with the expected stock returns and the increase of money supply growth rate will lead to the decline of the expected stock return rate in China. On this basis, a VAR containing four variables is used to provide further evidence for the role of inflation, stock returns and monetary policy. Then, an impulse response model is carried out to find that China’s inflation has a certain influence on China’s stock returns. Finally, according to the stock return model under long-term currency neutrality, it is suggested that the intermediary target of monetary policy can take the stock price as the auxiliary reference target. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9049804
- author
- Bao, Rui LU and Han, Xinxu LU
- supervisor
- organization
- course
- NEKN02 20211
- year
- 2021
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Inflation, Stock return, Monetary policy
- language
- English
- id
- 9049804
- date added to LUP
- 2021-10-26 08:15:59
- date last changed
- 2021-10-26 08:15:59
@misc{9049804, abstract = {{This paper aims to study the relationship between inflation, stock returns and monetary policy. The basic conclusion is: through the single-equation analysis of the Fisher effect, it is concluded that there is a negative correlation between inflation and stock returns in China. By examining the relationship between stock returns, the real economy and monetary policy, we find that the expected change of real economy has no significant relationship with the expected stock returns and the increase of money supply growth rate will lead to the decline of the expected stock return rate in China. On this basis, a VAR containing four variables is used to provide further evidence for the role of inflation, stock returns and monetary policy. Then, an impulse response model is carried out to find that China’s inflation has a certain influence on China’s stock returns. Finally, according to the stock return model under long-term currency neutrality, it is suggested that the intermediary target of monetary policy can take the stock price as the auxiliary reference target.}}, author = {{Bao, Rui and Han, Xinxu}}, language = {{eng}}, note = {{Student Paper}}, title = {{The relationship between inflation, monetary policy and stock returns: Evidence from China}}, year = {{2021}}, }