A Granger Causality Analysis between Money Supply and Stock Returns in China

Abstract

This paper selects January 2005 to 2021 as the sample period, and investigates the linear and nonlinear Granger causality between money supply growth rates (M0GR、M1GR and M2GR) and return rates of the Shanghai Securities Composite Index (SSEC) and Shenzhen Securities Componet Index (SZI) and Shanghai-Shenzhen 300 Index (CSI300) in China. The results show that money supply growth rates are not the linear or nonlinear Granger causes of the SSEC、SZI and CSI300, but SSEC、SZI and CSI300 are all linear or (and) non-linear Granger causes of money supply growth rates.