Proceedings of the 2025 International Conference on Financial Risk and Investment Management (ICFRIM 2025)

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The Linkage Effect and Market Reaction between the Fed’s Interest Rate Cutting Cycle and China’s Stock Markets

Authors
Zhiyuan Liu1, *
1Finance and Trade Faculties, Zhuhai College of Science and Technology, Zhuhai, 519041, China
*Corresponding author. Email: Zachary66668888@stu.zcst.edu.cn
Corresponding Author
Zhiyuan Liu
Available Online 3 July 2025.
DOI
10.2991/978-94-6463-748-9_69How to use a DOI?
Keywords
Fed rate cut; Chinese stock market; VAR model; transmission mechanism; impulse response
Abstract

This research centers on the effect of the Federal Reserve’s interest rate cuts on China’s stock market. Employing monthly data spanning from September 2016 to September 2022, it chooses variables such as the Shanghai Stock Exchange index, exchange rate, export volume, consumer price index, lending rate, and money supply. After conducting the Augmented Dickey-Fuller test and first-order differencing to ensure data stationarity, the optimal lag order for the VAR model is determined to be 1. The Granger causality test shows unidirectional causality among certain variables. Impulse response analysis indicates that short-term fluctuations of each variable notably influence the SSE index. It’s found that the Fed’s rate cuts have a short-term positive effect on China’s stock market, but the underlying mechanisms demand further exploration. Moreover, the VAR model has limitations, and both the data and methodology need refinement to enhance the accuracy and comprehensiveness of the analysis.

Copyright
© 2025 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title
Proceedings of the 2025 International Conference on Financial Risk and Investment Management (ICFRIM 2025)
Series
Advances in Economics, Business and Management Research
Publication Date
3 July 2025
ISBN
978-94-6463-748-9
ISSN
2352-5428
DOI
10.2991/978-94-6463-748-9_69How to use a DOI?
Copyright
© 2025 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Cite this article

risenwbib
TY  - CONF
AU  - Zhiyuan Liu
PY  - 2025
DA  - 2025/07/03
TI  - The Linkage Effect and Market Reaction between the Fed’s Interest Rate Cutting Cycle and China’s Stock Markets
BT  - Proceedings of the 2025 International Conference on Financial Risk and Investment Management (ICFRIM 2025)
PB  - Atlantis Press
SP  - 617
EP  - 627
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-748-9_69
DO  - 10.2991/978-94-6463-748-9_69
ID  - Liu2025
ER  -