The Impact of Monetary Policy on China’s Stock and Bond Markets

This study investigates how monetary policies impacted China’s capital (stock and bond) markets during 2010–16 by employing the dynamic conditional correlation GARCH (DCC-GARCH) model. The results indicate that both 2013 credit crisis 2015 stock market crash are closely related to policies. In 2013, excessive lending in banking sector government’s affected bond market. Consequently, occurred then expanded To solve problem of money shortages, government began use traditional new instruments frequently release liquidity. released liquidity quickly entered markets, causing an investment frenzy on market, increasing risk eventually resulting a crash. Furthermore, although co-movement between changed over time, it would maintain positive or negative for period. Therefore, when implements either these not only affect target but also impact other through their co-movement.