Research on the Influence of Securities Markets on Cross-Border Capital Flows Based on the DCC-MVGARCH Model

ABSTRACT

In the study of the impact of cross-border capital flows, most scholars at home and abroad focus on the method of linear time series mainly based on the vector autoregressive model (VAR), ignoring the volatility of variables in time series. In order to make up for the deficiency, the dynamic conditional correlation-generalized autoregressive conditional heteroskedasticity (DCC-GARCH) model can be used to study the nonlinear time-varying correlation between variables. With the help of Eviews12 software and the DCC-MVGARCH model, this paper studies the impact of securities markets on cross-border capital flows in China from domestic and foreign perspectives in the context of two financial crises and COVID-19. The results indicate that financial crises affect the correlation between the securities markets and cross-border capital flows. China's stock market is positively correlated with short-term capital flows and negatively correlated with long-term capital flows. Its booming bond market promotes short-term capital flows but fails to affect the long-term capital flows, and China's short-term capital flows are increasingly linked to the volatility of foreign stock markets. Therefore, it is necessary to improve the mechanism for better monitoring and analyzing cross-border capital flows, promote further development of financial supervision, and guide market players to face the securities market rationally. © 2023 SPIE.