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The analysis of interest rate mean and volatility spillover to the industrial production index and stock markets: The case of China

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  • Ching-Chun Wei

    ()
    (Department of Fiance, Providence Univesity)

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    Abstract

    Empirical results found the parameter estimates for the CCC-MGARCH models display that the short run persistence is positive and significant and the positive and significant ARCH and GARCH term show the ARCH and GARCH effect exist in these models. By concerning the correlations of bank reserve rate and discount rate to industrial production index, the correlation is positive and statistically significant for those variables. It indicated that China monetary policy have a positive impact to industrial production. The parameters estimates for DCC-MGARCH(1.1) model for China monetary policy to industrial production index and stock markets show the short-run persistence is positive significantly and at DCC(1.1) parameters. The sum of the DCC(1.1) parameter is less than one which implies that the model is strictly mean reverting.

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    File URL: http://www.accessecon.com/pubs/EB/2008/Volume3/EB-08C30066A.pdf
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    Bibliographic Info

    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 3 (2008)
    Issue (Month): 65 ()
    Pages: 1-14

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    Handle: RePEc:ebl:ecbull:eb-08c30066

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    Keywords: interest rate variables;

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    1. Thorbecke, Willem, 1997. " On Stock Market Returns and Monetary Policy," Journal of Finance, American Finance Association, vol. 52(2), pages 635-54, June.
    2. Frederic S. Mishkin, 1995. "Symposium on the Monetary Transmission Mechanism," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 3-10, Fall.
    3. Bredin, Don & O’Reilly, Gerard, 2001. "An Analysis of the Transmission Mechanism of Monetary Policy in Ireland," Research Technical Papers 1/RT/01, Central Bank of Ireland.
    4. Chen, Carl R. & Mohan, Nancy J. & Steiner, Thomas L., 1999. "Discount rate changes, stock market returns, volatility, and trading volume: Evidence from intraday data and implications for market efficiency," Journal of Banking & Finance, Elsevier, vol. 23(6), pages 897-924, June.
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