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The Impact of Crude Oil Price Shock: Evidence from Bangladesh

Author

Listed:
  • Qian Shen

    (College of Business and Public Affairs, Alabama A&M University, USA)

  • Mohammad Sogir Hossain Khandoker

    (Jagannath University, Dhaka, Bangladesh)

  • Joti Saha

    (Jagannath University, Dhaka, Bangladesh)

  • Rafiqul Bhuyan

    (College of Business and Public Affairs, Alabama A&M University, USA)

Abstract

This study aims to estimate the impact of crude oil price on the DSEX broad index of the Dhaka stock exchange using the Vector Error Correction Model (VECM) for the study period 2013:01-2022:12. It has decomposed the oil price shock into supply side and demand side oil shock. The empirical result shows that the stock price decreases significantly with crude oil prices driven by the shock in oil production. In contrast, the improvement in global economic activity results in a shock in the oil price which has a significant positive impact on the stock price. Furthermore, the accumulated shock in oil prices has a significant positive impact on stock prices. The variance decomposition under the VEC model shows that the demand shock of oil price contributes more to the variation in stock price for the oil-importing country Bangladesh. Since different oil price shocks have different impacts, the policy maker and investors implement decisions based on the understating of the sources of the shocks.

Suggested Citation

  • Qian Shen & Mohammad Sogir Hossain Khandoker & Joti Saha & Rafiqul Bhuyan, 2024. "The Impact of Crude Oil Price Shock: Evidence from Bangladesh," International Journal of Economics and Financial Issues, Econjournals, vol. 14(6), pages 257-266, October.
    • Handle: RePEc:eco:journ1:2024-06-28
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    More about this item

    Keywords

    Vector Error Correction Model; DSEX; Supply-Side Shock; Demand Shock;
    All these keywords.

    JEL classification:

    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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