The Threshold Cointegration For Structural Changes

Stock return-inflation relations are still economists'interest field, they are interested in whether the stock can hedge against inflation. As stock market becomes better and better, a great amount of stock investors come into the market. Can real stock returns be a good hedge against inflation and become investors'value-keeping and value-increasing tool? This paper are going to analyze stock return-inflation relations.Based on the unstable economic structure of our country, this paper use co-integration test for structural changes proposed by Qu and Boston (2004),estimating and testing for structural changes proposed by Bai and Perron(1998) to analyze stock return-inflation relations. However, due to the above two methods have their own conditions of use, this paper first test the effectiveness before using them and find the two methods have good effect. The results show that: the Fisher Effect exists in the stock market of our country, but relationship between stock teturns and inflation is unstable, altogether, there are two structural change in December 1992 and March 1995, with the development of stock market ,the positive correlation relationship between stock teturns and inflation are becoming weaker and weaker.