International Journal of Finance & Economics

Volume 29, Issue 2 pp. 1820-1833

RESEARCH ARTICLE

How does the stock market affect the interest rate corridor system in China?

Jing Wan,

Jing Wan

Department of Finance, College of Management and Economics, Tianjin University, Tianjin, China

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Shen Zhang,

Corresponding Author

Shen Zhang

[email protected]

orcid.org/0000-0003-1146-3708

Department of Finance, College of Management and Economics, Tianjin University, Tianjin, China

Correspondence

Shen Zhang, Department of Finance, College of Management and Economics, Tianjin University, No.92 Weijin Road, Nankai District, Tianjin 300072, China.

Email: [email protected]

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Xu Feng,

Xu Feng

Department of Finance, College of Management and Economics, Tianjin University, Tianjin, China

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Jing Wan,

Jing Wan

Department of Finance, College of Management and Economics, Tianjin University, Tianjin, China

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Shen Zhang,

Corresponding Author

Shen Zhang

[email protected]

orcid.org/0000-0003-1146-3708

Department of Finance, College of Management and Economics, Tianjin University, Tianjin, China

Correspondence

Shen Zhang, Department of Finance, College of Management and Economics, Tianjin University, No.92 Weijin Road, Nankai District, Tianjin 300072, China.

Email: [email protected]

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Xu Feng,

Xu Feng

Department of Finance, College of Management and Economics, Tianjin University, Tianjin, China

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First published: 30 December 2022

https://doi.org/10.1002/ijfe.2761

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Abstract

Exogenous shocks from the stock market may contribute to fluctuations in market-based interest rates in China. The interaction between the two markets may go beyond an aggregate level to distributional aspects. By using the cross-quantilogram method, we characterise how China's stock market affects its retail credit market in distribution. Our results show clearly which quantile ranges in the stock market influence tail events in the retail credit market. We also offer practical advice on potential upper and lower bounds of the interest rate corridor. Furthermore, the main results still hold even with the foreign exchange market or the benchmark interest rate being controlled. Based on this, we provide pertinent policy suggestions for China's ongoing transition to the interest rate corridor system.

Open Research

DATA AVAILABILITY STATEMENT

The market-based interest rate is constructed from the data of wealth management products provided by China Merchants Bank. Restrictions apply to the availability of these data, which were used under license for this study. Data are available from http://www.cmbchina.com/ with the permission of China Merchants Bank. The stock market data and exchange rate data that support the findings of this study is openly available in Wind Financial Terminal Database (WIND) at https://www.wind.com.cn/

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Volume29, Issue2

April 2024

Pages 1820-1833

How does the stock market affect the interest rate corridor system in China?

Abstract

Open Research

DATA AVAILABILITY STATEMENT

REFERENCES

References

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How does the stock market affect the interest rate corridor system in China?

Abstract

Open Research

DATA AVAILABILITY STATEMENT

REFERENCES

References

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