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Return spillover across China's financial markets

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  • Chen, Yu-Lun
  • Mo, Wan-Shin
  • Qin, Rong-Ling
  • Yang, J. Jimmy

Abstract

This paper examines return spillovers across China's bond, stock, and offshore (CNH/USD) and onshore (CNY/USD) exchange rate markets. We find evidence of a major transmitting role of the exchange rate market. Our results suggest that the Renminbi exchange rate market can reflect more market information and transmit it to bond and stock markets. Moreover, macroeconomic factors such as the monetary policy and economic policy uncertainty, the 2015 Renminbi exchange rate reform, and the COVID-19 pandemic are important determinants of the CNY/USD and CNH/USD spillover transmissions. Our results provide practical implications for investors, multinational corporations, and policymakers in China.

Suggested Citation

  • Chen, Yu-Lun & Mo, Wan-Shin & Qin, Rong-Ling & Yang, J. Jimmy, 2023. "Return spillover across China's financial markets," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:pacfin:v:80:y:2023:i:c:s0927538x23001233
    DOI: 10.1016/j.pacfin.2023.102057
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    More about this item

    Keywords

    Financial connectedness; Diebold and Yilmaz index; CNH/USD; CNY/USD;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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