Dynamic Interactions Between GDP, Exchange Rate USD\ BDT and Stock Prices in Bangladesh

Md Mohin Ali

Diplomová práce

Abstract:

This thesis investigates the dynamic relationship among gross domestic product (GDP), the exchange rate between the US Dollar and the Bangladeshi Taka (USD/BDT), and the performance of the Dhaka Stock Exchange as measured by the DSEX index in Bangladesh. The study covers the period from the first quarter of 2000 to the fourth quarter of 2024, using quarterly data. Bangladesh has experienced rapid economic growth over this period, while its stock market has shown pronounced volatility driven by both domestic structural changes and external macroeconomic shocks. Understanding how economic output and currency movements jointly influence equity market performance is therefore of considerable importance for investors, regulators, and economic policymakers. The study applies a sequential econometric framework grounded in time- series analysis. Following an assessment of the statistical properties of the data and a preliminary correlation analysis, a standard regression model is estimated to establish the baseline relationship. The analysis then advances to test whether the three variables share a stable long-run equilibrium relationship, using the Johansen cointegration test. Upon confirming cointegration, a Vector Error Correction Model is estimated to quantify both the long-run equilibrium and the speed at which the stock market adjusts to deviations from that equilibrium. Impulse response analysis and an out-of-sample forecast complement the estimation. The findings confirm that GDP, the exchange rate, and the DSEX index are bound together in a single stable long-run equilibrium over the study period. Economic growth is found to have a positive long-run effect on stock market performance, while exchange rate depreciation exerts a negative influence. In the short run, the exchange rate is identified as the dominant driver of stock market movements, with the stock market adjusting to macroeconomic disequilibria remarkably quickly. The exchange rate itself behaves as an externally determined variable that drives the system rather than responding to stock market conditions. These results indicate that exchange rate stability is the primary macroeconomic condition for sustained capital market performance in Bangladesh.

Keywords

Exchange Rate, Dynamic Interactions, GDP, DSEX, Cointegration, VECM, Bangladesh, Stock Market

Jazyk práce: angličtina

Datum vytvoření / odevzdání či podání práce: 4. 4. 2026

Obhajoba závěrečné práce

• Vedoucí: Ing. Michal Čermák, Ph.D.
• Oponent: Jiří Čermák, externi

Česká zemědělská univerzita v Praze

Provozně ekonomická fakulta

Magisterský studijní program:
Economics and Management