International Monetary Spillovers to Frontier Financial Markets: Evidence from Bangladesh

Rashedur Sardar () and Matthew Schaffer ()
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Rashedur Sardar: University of North Carolina at Greensboro, Department of Economics
Matthew Schaffer: University of North Carolina at Greensboro, Department of Economics

No 22-5, UNCG Economics Working Papers from University of North Carolina at Greensboro, Department of Economics

Abstract: This paper investigates international monetary spillovers to stock prices in Bangladesh, a frontier market that has been excluded from prior studies in the literature. Using daily stock price data for over 300 publicly traded firms in a high-frequency framework, we find that contractionary monetary shocks originating from the US, euro area, and China lower stock prices, with Chinese monetary shocks having the largest impact. Contractionary shocks originating from India, on the other hand, lead to a statistically significant increase in stock returns. The positive response is driven by a small number of policy decisions. When these outlier decisions are removed from the sample, contractionary Indian monetary shocks lead to a decline in stock prices in line with spillovers from the other countries.

Keywords: Monetary Policy; International Spillovers; Frontier Markets (search for similar items in EconPapers)
JEL-codes: E58 G15 O53 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2022-06-16
New Economics Papers: this item is included in nep-cba, nep-cna, nep-mac and nep-mon
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