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International monetary spillovers to frontier financial markets: Evidence from Bangladesh

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  • Md. Rashedur Rahman Sardar
  • Matthew Schaffer

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 event study 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

  • Md. Rashedur Rahman Sardar & Matthew Schaffer, 2024. "International monetary spillovers to frontier financial markets: Evidence from Bangladesh," International Finance, Wiley Blackwell, vol. 27(1), pages 81-100, April.
    • Handle: RePEc:bla:intfin:v:27:y:2024:i:1:p:81-100
    DOI: 10.1111/infi.12445
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