A Comparative Study Of Spillover Effects Between Foreign Exchange Markets, Stock Markets And Money Markets In China And The United States

The American dollar has gradually become stronger with the economic recovery happened in the USA and consequently,CNY financial markets become fluctuate more and more frequently with this trend of US dollar.Besides,after the leaders' meeting between Trump and Xi,it has reasons to believe that economic cooperation and disputes will also turn into a closer and more complicated environment in the future.In the past decade,it was observed that the interactions between China financial markets and US financial markets increased especially after the Crisis in2008 and also the shake in Chinese Shanghai Stock Market which was mainly caused by US capital shock and flow.This paper chooses data from six major financial markets in US and PRC to build the VAR-GARCH-BEKK model,which is designed to analyse the spillover effect relationships among different markets.By comparing results from different model settings,the spillover effect relations show many obvious differences.The main result is that in a bilateral trade setting,the exchange market plays a more vital role as a 'lighthouse' to predict the risk shock from each other,mainly from US to PRC.And US capital market makes a strong volatility spillover effect on all Chinese financial markets as well as the US stock market.Then we suggest that participants and financial regulators in those financial market should take specific measures,laws and regulations according to features of specific spillover effect relationships,improve their risk control ability and finally reduce the loss and keep markets operating stably.