Int. J. of Industrial and Systems Engineering   »   2014 Vol.18, No.1

 

 

Title: A comparative study of wealth effects of China's bond markets - the empirical analysis based on co-integration and ECM and state space model

 

Authors: Decai Zhou; Tao Zhong; Wenping Qi

 

Addresses:
School of Economics and Management, Nanchang University, P.O. Box 111, Xue Fu road 999, Hong GuTang Newly-Developed Area, Nanchang, Jiangxi Province, China
School of Economics and Management, Nanchang University, P.O. Box 111, Xue Fu road 999, Hong GuTang Newly-Developed Area, Nanchang, Jiangxi Province, China
School of Economics and Management, Nanchang University, P.O. Box 111, Xue Fu road 999, Hong GuTang Newly-Developed Area, Nanchang, Jiangxi Province, China

 

Abstract: Since the concept of wealth effect was introduced, scholarly studies mainly focus on the stock markets and the real estate markets, and less on bond markets. Given China's bond market is divided into the interbank bond market and exchange bond market, firstly, we use co-integration and error correction models to test the static wealth effect of the two markets, find that there are significant long-term wealth effects, while the short-term wealth effects are not obvious. Compared with the exchange bond market, the wealth effect of the interbank bond market is higher than it. Then, we use state space models to test the dynamic wealth effect of the two markets, the results show that they are both obvious, and the interbank bond market's is higher, but the gap diminishes gradually. In view of the significant wealth effect difference between the two markets, we suggest that China unify the two bond markets in order to bring the bigger wealth effect.

 

Keywords: China; bond markets; wealth effect; co-integration model; error correction model; state space models; interbank bond market; exchange bond market; modelling.

 

DOI: 10.1504/IJISE.2014.064341

 

Int. J. of Industrial and Systems Engineering, 2014 Vol.18, No.1, pp.65 - 75

 

Available online: 19 Aug 2014

 

 

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