Volume 21: Article 8

Empirical Evidence of Dynamic Interrelationship between Gold Price, Crude Oil Price, Stock Market and Exchange Rate in Bangladesh

Ratul Kumar Saha*
Nilufer Yeasmin**

Abstract: This research observes the interrelationship between crude oil price, gold price, exchange rate, and stock market in Bangladesh. Monthly data of 14 years from 2005 to 2019 are collected from different data sources. Dynamic Conditional Correlation (DCC) – GARCH model and Granger Causality test are conducted to find relationship among variables. Empirical analysis concludes that increase in price of crude oil and gold price would lead to declining exchange rate or appreciation of Bangladeshi TAKA. Similar conclusion cannot be made in case of stock market index as it shows both negative and positive correlation with crude oil price and price of gold. However, a unidirectional causal relationship has been found between exchange rate and stock price index. This finding stresses on the necessity of dynamic and rational decision making in policy level to efficiently cope up with the challenge of managing volatility in stock market and exchange rate.

Keywords: Oil Price, Stock Market, Gold Price, Exchange Rate, DCC GARCH

JEL Code: E32, Q31, Q43

* Assistant Professor, Institute of Business Administration, Jahangirnagar University, Savar, Dhaka-1342. E-mail: ratul@juniv.edu
** Independent Researcher, Dhaka. Email: yeasmin.sharna@gmail.com