Evaluating the effectiveness of macroeconomic determinants on the performance of the Dhaka Stock Exchange: A time series approach

The study examines the causal relationships between selected macroeconomic variables and the Dhaka Stock Exchange Broad Index (DSEX) from 2013 to 2023. The researcher employed time series economic approaches such as the Augmented Dickey-Fuller (ADF) test for stationarity, the Vector Autoregression (VAR) and Granger causality tests for short-term dynamics, and Johansen's co-integration test for long-term relationships. The findings demonstrate no co-integration between the variables, implying that there is no substantial long-term relationship between how they change over time. However, the VAR analysis shows short-term association between the chosen macroeconomic factors and the DSEX index performance. This implies that changes in any of these macroeconomic variables may have a short-term impact on the DSEX index. Additionally, causality testing reveals unidirectional relationships, indicating that the DSEX index has a considerable impact on numerous economic indicators, including GDP growth, money supply growth, unemployment, inflation and interest rates. Overall, the DSEX index plays an important role in Bangladesh's macroeconomic landscape by accurately forecasting changes in these variables. This study provides important insights into the operation of the Bangladeshi stock market and fills a gap in the literature on developing economies. The results have implications for Bangladeshi investors and policymakers aiming to increase profits, make informed decisions, and support economic stability. Future research should take into account other macroeconomic variables and market indexes to have a better understanding of stock market dynamics.