This paper investigates the issue of co-movement and
interaction among the monetary, foreign exchange and stock markets by employing
the data from China’s financial markets. Based on the ICA-EGARCH-M model, we
explore the volatility spillover effects so as to illustrate the overall
co-movements across financial markets. Furthermore, in order to observe the
multi-market dynamic relationship variation process, we calculate the dynamic
correlation coefficients with the AG-DCC-MGARCH model. Our findings provide both
static and dynamic evidence on the co-movement and interaction effects of
financial markets which may lead to the systemic financial risk.
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