BY GROUP 8
Group Members   Nusrat Sharmin   Faisal Jahan   Shanewaz Parvez   Rifat
Inflation… A term used in Economics. When a rise in the general level of prices of goods and  services in an economy ove...
What Is Inflation?? The rate at which the general level of prices for goods  and services is rising called Inflation. A ...
Inflation
InflationMethod of calculation (continued)Example: In January 2007, the U.S.Consumer        Price     Index was202.416, an...
InflationEffects of InflationGeneral effects:• An increase in the general level of prices implies a decrease in the  purch...
InflationNegative effects:• Decrease in the real value of money.• Unpredictable inflation rates.• Discourage investment an...
InflationPositive effects• Labor market adjustments.• Ensures the central bank to adjust nominal  interest rates• Tobin ef...
Economic Condition of BangladeshPresent Scenario of Bangladesh Economy:               GDP - Composition by Sector         ...
Economic Condition of Bangladesh                    6.71(FY 2011-12)        6.31(FY 2010-11)           GDP Growth
Economic Condition of BangladeshPositive Growth of GDPExports DecreasedImports IncreasedInterest Rate Increased
Economic Condition of Bangladesh• Inflation is recorded at 9.15 percent in May of  2012
Major causes of inflationExcess money supply       Quantity theory of money       MV = PQ       Where       M = the nomin...
REASONS BEHIND INFLATION IN BANGLADESHInflation can happen when governments print an excess of money to deal witha crisis....
Food Inflation          Non-Food Inflation                             Transmission mechanism ofExchange rate fluctuations...
Controlling Inflation• Monetary policy: High interest rates and slow growth of the money  supply are the traditional ways...
Controlling Inflation Fixed exchange rate:• Under a fixed exchange rate currency regime, a  countrys currency is tied in v...
Controlling Inflation• Wage & price control:• Wage and price controls are regarded as a  temporary and exceptional measure...
Controlling Inflation Additional Policies:• If Bangladesh could indeed bring about positive fruits  from its export of gar...
Conclusion• We strongly feel that it is high time for the policy makers  of the government of Bangladesh and its central b...
Question Time
Inflation & Bangladesh Economy
Upcoming SlideShare
Loading in …5
×

Inflation & Bangladesh Economy

9,099 views

Published on

This is an overview of inflation and Bangladesh Economy

Published in: Economy & Finance
  • Be the first to comment

Inflation & Bangladesh Economy

  1. 1. BY GROUP 8
  2. 2. Group Members Nusrat Sharmin Faisal Jahan Shanewaz Parvez Rifat
  3. 3. Inflation… A term used in Economics. When a rise in the general level of prices of goods and services in an economy over a period of time is known as Inflation. If general price level rises, each unit of currency buys fewer goods and services. Often triggered when demand for goods is greater than the available supply or when unemployment is low and workers can command higher salaries. Inflation also reflects erosion in the purchasing power of money.
  4. 4. What Is Inflation?? The rate at which the general level of prices for goods and services is rising called Inflation. A price level is a hypothetical measure of overall prices for some set of goods and services. Typically, a price level is approximated with a price index.
  5. 5. Inflation
  6. 6. InflationMethod of calculation (continued)Example: In January 2007, the U.S.Consumer Price Index was202.416, and in January 2008 itwas 211.080. The formula forcalculating the annual percentagerate inflation of 2007 is Inflation (year-on-year) in the United States from 1914 to 2010.
  7. 7. InflationEffects of InflationGeneral effects:• An increase in the general level of prices implies a decrease in the purchasing power of the currency.• General level of price rises, each unit currency buys fewer goods and services.• Inflation can not be distributed evenly in the economy.
  8. 8. InflationNegative effects:• Decrease in the real value of money.• Unpredictable inflation rates.• Discourage investment and savings.• Add inefficiencies in the market.• Difficulties with budget and long-term planning for companies.• Hidden tax increase.• Demand of rapid wage increase• Causes Hyperinflations.
  9. 9. InflationPositive effects• Labor market adjustments.• Ensures the central bank to adjust nominal interest rates• Tobin effect, “A moderate level of inflation can increase investment in an economy leading to faster growth or at least higher steady state level of income”.
  10. 10. Economic Condition of BangladeshPresent Scenario of Bangladesh Economy: GDP - Composition by Sector Agriculture 18% Service Industry 53% 29%
  11. 11. Economic Condition of Bangladesh 6.71(FY 2011-12) 6.31(FY 2010-11) GDP Growth
  12. 12. Economic Condition of BangladeshPositive Growth of GDPExports DecreasedImports IncreasedInterest Rate Increased
  13. 13. Economic Condition of Bangladesh• Inflation is recorded at 9.15 percent in May of 2012
  14. 14. Major causes of inflationExcess money supply Quantity theory of money MV = PQ Where M = the nominal quantity of money V = the velocity of money in final expenditures P = the general price level Q = an index of the real value of final expendituresUnemployment Phillips curve showed that unemployment and inflation shared an inverse relationship
  15. 15. REASONS BEHIND INFLATION IN BANGLADESHInflation can happen when governments print an excess of money to deal witha crisis. As a result, prices end up rising at an extremely high speed to keep upwith the currency surplus. This is called the demand-pull, in which prices areforced upwards because of a high demand Excess money borrows by Government from central bank The overall food price Exchange rate fluctuations Growth of money supply Increased inflow of workers’ remittances
  16. 16. Food Inflation Non-Food Inflation Transmission mechanism ofExchange rate fluctuations foreign exchange reserves
  17. 17. Controlling Inflation• Monetary policy: High interest rates and slow growth of the money supply are the traditional ways through which central banks fight or prevent inflation Keynesians emphasize reducing aggregate demand during economic expansions and increasing demand during recessions to keep inflation stable.
  18. 18. Controlling Inflation Fixed exchange rate:• Under a fixed exchange rate currency regime, a countrys currency is tied in value to another single currency or to a basket of other currencies (or sometimes to another measure of value, such as gold).• A fixed exchange rate is usually used to stabilize the value of a currency, vis-a-vis the currency it is pegged to.
  19. 19. Controlling Inflation• Wage & price control:• Wage and price controls are regarded as a temporary and exceptional measure, only effective when coupled with policies designed to reduce the underlying causes of inflation during the wage and price control regime.
  20. 20. Controlling Inflation Additional Policies:• If Bangladesh could indeed bring about positive fruits from its export of garments to India• If the foreign remittance flow pour in regularly and satisfactorily• If infrastructural development is done as per plan• If utility services, like power, gas and energy could be ensured adequately• If proper investment from abroad, and local entrepreneurs could be achieved.
  21. 21. Conclusion• We strongly feel that it is high time for the policy makers of the government of Bangladesh and its central bank to come forward with pro-active and forward-looking fiscal and monetary policies and take drastic steps to control and contain the double-digit inflation. It is an appropriate time to enforce "austerity measures" by cutting unproductive and administrative expenditure of the government departments, stabilize the price level by not increasing the energy and fuel costs.
  22. 22. Question Time

×