Synthesization of macroeconomic policies and stock return synchronicity: Evidence from countries along the Belt and Road Initiative

This study investigated the impact of macroeconomic policy changes in China on the stock markets of its Belt and Road Initiative (BRI) partners, whose economies have significant spillover effects. This topic is critical, because the BRI is a pivotal regional cooperation framework, which substantially influences economic dynamics and trade expansion across participating countries. We studied 47 countries from 2006 to 2021, and found a positive relationship between the effectiveness of macroeconomic policies and stock return synchronicity in BRI countries. We also explored monetary and fiscal policies and discovered that increased policy intensities correlate with higher synchronicity in BRI stock markets. Additionally, the benefit of macroeconomic policies was more pronounced in countries with closer trade ties and greater policy coordination with China. Further investigation showed that during periods of increased economic policy uncertainties within China and globally, the increase of stock return synchronicity is more pronounced.