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International Monetary Spillovers to Frontier Financial Markets: Evidence from Bangladesh

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  • Sardar, Rashedur

    (University of North Carolina at Greensboro, Department of Economics)

  • Schaffer, Matthew

    (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.

Suggested Citation

  • Sardar, Rashedur & Schaffer, Matthew, 2022. "International Monetary Spillovers to Frontier Financial Markets: Evidence from Bangladesh," UNCG Economics Working Papers 22-5, University of North Carolina at Greensboro, Department of Economics.
    • Handle: RePEc:ris:uncgec:2022_005
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    More about this item

    Keywords

    Monetary Policy; International Spillovers; Frontier Markets;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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