This document analyzes the relationship between inflation and economic growth in Bangladesh from 1980 to 2014. It finds that inflation has negatively impacted growth when inflation rates are very high, such as over 20%. However, moderate inflation rates between 3-8% appear correlated with higher economic growth of around 5-6%. The relationship between inflation and growth is non-linear, with inflation potentially stimulating growth up to a certain threshold, after which high inflation hinders growth. Understanding this relationship is important for Bangladesh's central bank in conducting monetary policy.
Inflation in Bangladesh and its Impact on Economic GrowthAkib Al Adib Pranto
Inflation in Bangladesh and its Impact on Economic Growth is a academic presentation slide made and uploaded by the student of Department of Finance, Jagannath University. Here we focus on inflation in Bangladesh, reasons of inflation in Bangladesh, effect of inflation in Bangladesh, and controlling process of inflation in Bangladesh.
Agenda:
1. What is Inflation.
2. Real life example
3. Causes of inflation
4. Effects of inflation on economy
5. Control Mechanism for inflation
6. Recent and past Inflation rate of Bangladesh
7. Reasons of inflation and measures taken to control inflation in
Bangladesh.
Inflation in Bangladesh and its Impact on Economic GrowthAkib Al Adib Pranto
Inflation in Bangladesh and its Impact on Economic Growth is a academic presentation slide made and uploaded by the student of Department of Finance, Jagannath University. Here we focus on inflation in Bangladesh, reasons of inflation in Bangladesh, effect of inflation in Bangladesh, and controlling process of inflation in Bangladesh.
Agenda:
1. What is Inflation.
2. Real life example
3. Causes of inflation
4. Effects of inflation on economy
5. Control Mechanism for inflation
6. Recent and past Inflation rate of Bangladesh
7. Reasons of inflation and measures taken to control inflation in
Bangladesh.
The Impact of Monetary Policy on Economic Growth and Price Stability in Kenya...iosrjce
The government of Kenya’s economic blueprint dubbed ‘Kenya Vision 2030’ acknowledges the
importance of maintaining a stable macro-economic environment. Despite Kenya implementing monetary
policy aimed at achieving stable prices and fostering economic growth, the economy has been reporting low
economic growth and high rates of inflation. These implies there is still a point of disconnect between what
Central bank of Kenya Pursues and the outcome of the objectives. In this study, structural vector autoregresion
(SVAR) model is estimatedto trace the effects of monetary policy shocks on economic growth and prices in
Kenya. Three alternative monetary policy instruments were put into use i.e. broad money supply (M3), interbank
lending rate (ILR) and the real effective exchange rate (REER). The study found evidence that monetary policy
innovations carried out on the quantity-based nominal anchor (M3) has modest effects on economic growth and
prices with a very fast speed of adjustment. Innovations on the price-based nominal anchors (ILR and REER)
have relative and fleeting effects on real GDP. The study recommended that Central Bank of Kenya should
place more emphasis on the use of the quantity-based nominal anchor rather than the price-based nominal
anchor
This document was made as an assignment for the course of Economics.
This document was made by the help of several books and online portals. Thanks to the author of that resources.
The Impact of Monetary Policy on Economic Growth and Price Stability in Kenya...iosrjce
The government of Kenya’s economic blueprint dubbed ‘Kenya Vision 2030’ acknowledges the
importance of maintaining a stable macro-economic environment. Despite Kenya implementing monetary
policy aimed at achieving stable prices and fostering economic growth, the economy has been reporting low
economic growth and high rates of inflation. These implies there is still a point of disconnect between what
Central bank of Kenya Pursues and the outcome of the objectives. In this study, structural vector autoregresion
(SVAR) model is estimatedto trace the effects of monetary policy shocks on economic growth and prices in
Kenya. Three alternative monetary policy instruments were put into use i.e. broad money supply (M3), interbank
lending rate (ILR) and the real effective exchange rate (REER). The study found evidence that monetary policy
innovations carried out on the quantity-based nominal anchor (M3) has modest effects on economic growth and
prices with a very fast speed of adjustment. Innovations on the price-based nominal anchors (ILR and REER)
have relative and fleeting effects on real GDP. The study recommended that Central Bank of Kenya should
place more emphasis on the use of the quantity-based nominal anchor rather than the price-based nominal
anchor
This document was made as an assignment for the course of Economics.
This document was made by the help of several books and online portals. Thanks to the author of that resources.
Question 1Response 1Development inside and out effects t.docxaudeleypearl
Question 1:
Response 1:
Development inside and out effects the entire country's economy. It impacts the managing body, regardless the clearly irrelevant subtleties in the average person's dependably life. Both a conditions and clear deferred results of how the economy is getting along, swelling has the two its fans and spoilers. Distinctive envisions that particular degrees of swelling are helpful for a prospering economy, yet that progressively critical rates raise concerns. It can degrade the money basically and, at logically lamentable, has been a key part to subsidences.
Swelling, as referenced, is the rate a worth ascensions, and fundamentally how much the dollar is worth at a given moment concerning checking. The idea behind swelling being an impact for good in the economy is that a reasonable enough rate can nudge financial movement without debasing the money so much that it ends up being basically vain (Kohn, 2006).
Swelling can in like manner falter from asset for asset. Subordinate upon the season, the expense of gas could go up independently from with everything considered headway as it routinely does as summer moves close. In reality, there is even a term - focus improvement - for swelling that parts in everything except for sustenance and imperativeness (gas and oil), as these regions have separate factors that add to them. There are a wide degree of sorts of swelling, subordinate upon what remarkable is being viewed comparatively as what the development rate truly is by all accounts. For example, what happens if the swelling rate is well over the Fed's normal goal? At a higher rate, yet still in the single digits, that is known as walking swelling. It is seen as concerning yet sensible (Ball, 2006).
Swelling is generally depicted reliant on its rate and causes. By and large, Inflation happens in an economy when vitality for thing and experiences outmaneuvers the supply of yield. in this manner, clarifications behind Inflation have different sides, the intrigue side and supply side. The widely inclusive activity of hazard premiums in driving enlargement pay over the scope of advancing years is dependable with secured budgetary improvement and inside and out oblige cash related procedure events in the moved economies. The degree for further fitting budgetary enabling seen with money related stars seems to have declined amidst the enough low advance charges and gigantic monetary records of national banks (Bodie, 2016).
In relentless time, the correspondence of perils has wound up being constantly phenomenal, the general point of view has lit up, and money related conditions have engaged on net. With the work superstar proceeding to reinforce, and GDP improvement expected to keep up a vital good ways from back in the consequent quarter, it likely will be fitting soon to change the affiliation supports rate. Likewise, if the economy propels as shown by the SEP concentrate way, the affiliation supports rate will probably app ...
Comparative Longitudinal Analysis on Global Inflation with a special emphasis...Ram Sharma
https://zenodo.org/record/7939068#.ZGQTS_dX6Ef
This is the presentation for the research “Comparative Longitudinal Analysis on Global Inflation with a special emphasis on Indian Economy” presented at the Second International Conference at the Daly College of Business Management, DAVV Indore.
The research was further published in its peer to peer reviewed conference journal.
The economic fluctuations in Indian housing markets have been time and again proved to be led by inflation (Granger Cause) (Richa Pandey & V. Mary Jessica, 2020).
The purpose of this study is to perform a comparative longitudinal analysis on Global Inflation with a special emphasis on Indian Economy.
The study aims to observe the positive cause-effect relationship between the rise of money supply and circulation in the economy and the succeeding rise in housing prices.
As Gregory Wolfe theorised, “The inflation of our time is intimately connected with some of its most obdurate ideas, forces, postulates, and institutions and can be overcome only by influencing these profound causes and conditions. It is not just a disorder of the monetary system which can be left to financial experts to redress, it is a moral disease, a disorder of society. This inflation, too, belongs to the things which can be understood and remedied only in the area beyond supply and demand.”
Friedman’s permanent income hypothesis suggests that people would change their desired consumption if changes in housing prices affect their expected lifetime wealth. Moreover, an inflationary housing market can be termed essentially, as one of the most major contributors to a nation’s overall inflation (Jared Bernstein, Ernie Tedeschi, and Sarah Robinson, 2021).
A comparative longitudinal analysis on inflation can provide significant insights into the evolution of prices over time. By comparing inflation rates across different countries, researchers can identify patterns and commonalities that can help explain the underlying causes of inflation.
Additionally, by looking at inflation over a long period of time, this research can help economists, administrators and businesses in identifying periods of high and low inflation to investigate the factors that may have contributed to these changes. In general, inflation is defined as a sustained increase in the price level of goods and services in an economy.
Over time, inflation can erode the purchasing power of a currency, as prices for goods and services rise faster than the currency’s value. There are a variety of factors that can contribute to inflation, including increases in the cost of production, changes in monetary policy, and demand-side pressures.
https://zenodo.org/record/7942937#.ZGQQyPdX6Ed
Business Design OutlineThe StudentBA500-ManagementInstructor.docxRAHUL126667
Business Design Outline
The Student
BA500-Management
Instructor
Date
Table of Contents
1.0 Executive Summary
1.1 Objective
1.2 Mission
1.3 Keys to Success
2.0 Explain the roles, functions, and management approaches to leading
2.1 Levels of Management
2.2 Planning
2.3 Organizing
2.4 Leading
2.5 Controlling
2.6 Classical Management
2.7 Behavioral Management
2.8 Modern Management
3.0 Describe Formal and Informal Structures
3.1 Functional
3.2 Divisional
3.3 Matrix
4.0 Organizing Resources
4.1 Divide Work
4.2 Arrange Resources
4.3 Coordinate Activities
5.0 Alternative Views of Ethics
5.1 Utilitarian
5.2 Individualism
5.3 Moral-rights
5.4 Commutative Justice
6.0 Emotional Intelligence
6.1 Self-Awareness
6.2 Social Awareness
6.3 Self-Management
6.4 Motivation and Persistence
6.5 Relationship Management
7.0 Teams
7.1 Forming
7.2 Storming
7.3 Norming
7.4 Performing
7.5 Adjourning
Inflation, Unemployment and the Fed
Gross Domestic Product (GDP) is the total monetary value of goods produced and services provided in a particular country in a year. The real GDP is total monetary value of goods produced and services provided in a particular country in a year adjusted for the changes of their prices in that year. The nominal GDP total monetary value of goods produced and services provided in a particular country in a year before adjusting for the changes of their prices in that year.
This is the general increase in prices of goods and services and the subsequent fall in the purchasing power of money. Inflation in a year is calculated by divided the change in price by the price of the product in the previous year and multiplying by 100 percent. The two types of inflation are: demand-push inflation and cost-push inflation. Demand-push inflation occurs due to the faster increase in demand for goods and services as compared with the supply of these goods and services. Cost-push inflation occurs when the prices of raw materials are taxes increase and thus increasing the total cost of production and this will be transferred to goods produced in order to off-set the cost (Axilrod, 2013). During inflation borrowers benefit because the money they borrow today has more purchasing power than when they pay it back in a year or more thus hindering the lender because it worth less than the amount borrowed.--
Unemployment is a phenomenon which occurs when individuals who have skills and are looking for work but cannot find. It is normally used as a measure of how the economy is performing. Unemployment rate is always used to measure unemployment in a country in a given year and this rate is calculated as the total number of unemployed people divided by the total labor ...
I prepared this slide on my research paper 'fiscal deficit and inflation ' on the current economic situation of India. In this data has been collected from economic survey 2011-12 and several other books. This slide has full data how the the central govt. and central bank uses their, fiscal policy and monetary policy respectively Hope, it will provide a good help for students who want to know about these concepts of economics.
gaurav tripathi(undergrad econ)>
here is a ppt on 'fiscal deficit and inflation'. it basically deals , that how govt. and central govt. makes their fiscal and central policy. the problems and solutions are shown. just gotta follow them. <gaurav>
Model Attribute Check Company Auto PropertyCeline George
In Odoo, the multi-company feature allows you to manage multiple companies within a single Odoo database instance. Each company can have its own configurations while still sharing common resources such as products, customers, and suppliers.
Operation “Blue Star” is the only event in the history of Independent India where the state went into war with its own people. Even after about 40 years it is not clear if it was culmination of states anger over people of the region, a political game of power or start of dictatorial chapter in the democratic setup.
The people of Punjab felt alienated from main stream due to denial of their just demands during a long democratic struggle since independence. As it happen all over the word, it led to militant struggle with great loss of lives of military, police and civilian personnel. Killing of Indira Gandhi and massacre of innocent Sikhs in Delhi and other India cities was also associated with this movement.
2024.06.01 Introducing a competency framework for languag learning materials ...Sandy Millin
http://sandymillin.wordpress.com/iateflwebinar2024
Published classroom materials form the basis of syllabuses, drive teacher professional development, and have a potentially huge influence on learners, teachers and education systems. All teachers also create their own materials, whether a few sentences on a blackboard, a highly-structured fully-realised online course, or anything in between. Despite this, the knowledge and skills needed to create effective language learning materials are rarely part of teacher training, and are mostly learnt by trial and error.
Knowledge and skills frameworks, generally called competency frameworks, for ELT teachers, trainers and managers have existed for a few years now. However, until I created one for my MA dissertation, there wasn’t one drawing together what we need to know and do to be able to effectively produce language learning materials.
This webinar will introduce you to my framework, highlighting the key competencies I identified from my research. It will also show how anybody involved in language teaching (any language, not just English!), teacher training, managing schools or developing language learning materials can benefit from using the framework.
How to Create Map Views in the Odoo 17 ERPCeline George
The map views are useful for providing a geographical representation of data. They allow users to visualize and analyze the data in a more intuitive manner.
Ethnobotany and Ethnopharmacology:
Ethnobotany in herbal drug evaluation,
Impact of Ethnobotany in traditional medicine,
New development in herbals,
Bio-prospecting tools for drug discovery,
Role of Ethnopharmacology in drug evaluation,
Reverse Pharmacology.
We all have good and bad thoughts from time to time and situation to situation. We are bombarded daily with spiraling thoughts(both negative and positive) creating all-consuming feel , making us difficult to manage with associated suffering. Good thoughts are like our Mob Signal (Positive thought) amidst noise(negative thought) in the atmosphere. Negative thoughts like noise outweigh positive thoughts. These thoughts often create unwanted confusion, trouble, stress and frustration in our mind as well as chaos in our physical world. Negative thoughts are also known as “distorted thinking”.
Welcome to TechSoup New Member Orientation and Q&A (May 2024).pdfTechSoup
In this webinar you will learn how your organization can access TechSoup's wide variety of product discount and donation programs. From hardware to software, we'll give you a tour of the tools available to help your nonprofit with productivity, collaboration, financial management, donor tracking, security, and more.
1. The Growth-Inflation relationship in Bangladesh 2014
1
Abstract:
Inflation has appeared to be a major strain on the economy of the country in the recent past.
Understanding the relationship between inflation and output growth is very crucial in setting the
targets of policy goals, inflation in particular and formulating the policy framework. Several
cross-country and single country studies on the issue indicate that the relationship between
inflation and output growth is not linear and there exist a threshold level of inflation, up to which
inflation appears to be helpful for economic growth and beyond which it appears to impede
growth. This simply means that likewise the cost of high inflation, keeping too low inflation is
also costly in terms of output loss. The objective of this study is to explore the inflation, causes
and its historical trends. In this regard, the current study makes an attempt to examine the
relationship between inflation and output growth to identify a realistic level of threshold level of
inflation in Bangladesh. It is widely believed that moderate and stable inflation rates promote the
development process of a country, and hence economic growth. Moderate inflation supplements
return to savers, enhances investment, and therefore, accelerates economic growth of the country.
This paper empirically explores the present relationship between inflation and economic growth
in the context of Bangladesh. Using annual data set on real GDP and CPI for the period of 1980
to 2014, specifically, our conclusion is of direct relevance to the conduct of the monetary policy
by the Bangladesh Bank.
3. 3
The Growth-Inflation relationship in Bangladesh 2014
1.1 Introduction:
Inflation-targeting central banks frequently justify their narrow focus on inflation by arguing that
maintaining a low and stable rate of inflation is the best way for them to promote high
employment and output. Yet, neither mainstream economic theory nor existing empirical studies
offer much support for the belief that a country's real economic performance is significantly
improved by reducing the trend rate of inflation, except in extreme circumstances. Indeed,
reducing inflation too close to zero worsens economic performance because of downward
nominal wage rigidity. Moreover, too low a rate of inflation can result in real instability because
of the zero lower bound on nominal interest rates. Given the lack of support from economic
science, and because of the dangers posed by nominal wage rigidity and the zero lower bound,
inflation-targeting central banks are reluctant to reduce their targets below 2 or 3 percent.
However, the commonly acknowledged weakness of the micro foundations of mainstream
monetary theory leaves many wondering if there might still be significant costs of inflation that
theorists have not yet discovered.
1.2 Objective of the Case Study:
Primary objective:
The main objective of the study is to know how the factors of Central Banking and Monetary
Policy work in our country.
Secondary objective:
The case study has the following objectives:
4. 4
The Growth-Inflation relationship in Bangladesh 2014
To know about Inflation, unemployment, Growth Trend.
How inflation and Growth Trend fluctuate.
Relationship among the inflation, and growth trend.
Causes behind the inflation, unemployment and growth trend.
1.3 Scope:
There were huge scopes to work in the area of this Case Study. Considering the dead line, and
exposure of the paper has been wide-ranging. The study “The Growth-Inflation relationship in
Bangladesh” has covered overall scenario of Central Banking and Monetary Policy situation of
Bangladesh. It has measured the living standard of mass people. We have a chance to work on
the economic variable used in modern economic world. By doing the assignment, we are able to
know that the importance of inflation, unemployment & growth trend to assess how the people of
the country living in. In the case study we have showed how the above variables are inter related
on each other.
1.4 Methodology:
We have used the concept of the course, information of the case study.
Sources of Data:
Here the secondary sources of information were used. The secondary sources are: Books and
Website.
5. 5
The Growth-Inflation relationship in Bangladesh 2014
Limitations:
While conducting the report on “The Growth-Inflation relationship in Bangladesh”, some
limitations were yet present there:
Because of time shortage many related area can’t be focused in depth.
Website in different organization of Bangladesh contains poor information.
Recent data and information on different activities was unavailable.
7. 7
The Growth-Inflation relationship in Bangladesh 2014
2.1 Definition:
“Too much money in circulation causes the money to lose value”-this is the true meaning of
inflation. The popular opinion about the costs of inflation is that inflation makes everyone worse
off by reducing the purchasing power of incomes, eroding living standards and adding, in many
ways, to life’s uncertainties. In economics, inflation is a rise in the general level of prices of
goods and services in an economy over a period of time. Inflation refers to a rise in prices that
causes the purchasing power of a nation to fall. Inflation is a normal economic development as
long as the annual percentage remains low; once the percentage rises over a pre-determined
level, it is considered an inflation crisis. In another word “Inflation means that your money won’t
buy as much today as you could yesterday”.
2.2 Effect of Inflation in Economy:
General Effect:
An increase in the general level of prices implies a decrease in the purchasing power of the
currency. That is, when the general level of prices rises, each monetary unit buys fewer goods
and services. Increases in the price level (inflation) erode the real value of money (the functional
currency) and other items with an underlying monetary nature (e.g. loans and bonds). For
example if one takes a loan where the stated interest rate is 6% and the inflation rate is at 3%, the
real interest rate that one are paying for the loan is 3%. It would also hold true that if one had a
loan at a fixed interest rate of 6% and the inflation rate jumped to 20% one would have a real
interest rate of -14%.
8. 8
The Growth-Inflation relationship in Bangladesh 2014
Negative Effect:
High or unpredictable inflation rates are regarded as harmful to an overall economy. They add
inefficiencies in the market, and make it difficult for companies to budget or plan long-term.
Inflation can act as a drag on productivity as companies are forced to shift resources away from
products and services in order to focus on profit and losses from currency inflation. Uncertainty
about the future purchasing power of money discourages investment and saving and inflation can
impose hidden tax increases. In case of international trade, ‘Higher inflation in one economy
than another will cause the first economy's exports to become more expensive and affect the
balance of trade’
Positive Effect:
Positive effects include ensuring central banks can adjust nominal interest rates (intended to
mitigate recessions), and encouraging investment in non-monetary capital projects. It puts impact
on Labor-market adjustments, Room to maneuver, Mundell-Tobin effect, Instability with
Deflation etc.
2.3 Causes behind inflation:
In developing countries, in contrast, inflation is not a purely monetary phenomenon, but is often
linked with fiscal imbalances and deficiencies in sound internal economic policies. Beside,
factors typically related to fiscal imbalances such as higher money growth and exchange rate
depreciation arising from a balance of payments crisis dominate the inflation process in
9. 9
The Growth-Inflation relationship in Bangladesh 2014
developing countries. There were different schools of thought as to the causes of inflation. Most
can be divided into two broad areas:
1. Quality theories of inflation
2. Quantity theories of inflation.
The quality theory of inflation rests on the expectation of a seller accepting currency to be able to
exchange that currency at a later time for goods that are desirable as a buyer. The quantity theory
of inflation rests on the quantity equation of money that relates the money supply, its velocity,
and the nominal value of exchanges. Adam Smith and David Hume proposed a quantity theory
of inflation for money, and a quality theory of inflation for production.
After analyzing two theories of causes we have got here some physical cause to face which cover
both theories depending on a number of factors. These are given below-
Excess of money:
Inflation can happen when governments print an excess of money to deal with a crisis. As a
result, prices end up rising at an extremely high speed to keep up with the currency surplus. This
is called the demand-pull, in which prices are forced upwards because of a high demand.
Rise in production cost:
Another common cause of inflation is a rise in production costs, which leads to an increase in the
price of the final product. For example, if raw materials increase in price, this leads to the cost of
production increasing, which in turn leads to the company increasing prices to maintain steady
profits? Rising labor costs can also lead to inflation. As workers demand wage increases,
companies usually chose to pass on those costs to their customers.
10. 10
The Growth-Inflation relationship in Bangladesh 2014
International lending & national debt:
Inflation can also be caused by international lending and national debts. As nations borrow
money, they have to deal with interests, which in the end cause prices to rise as a way of keeping
up with their debts. A deep drop of the exchange rate can also result in inflation, as governments
will have to deal with differences in the import/export level.
Government taxes:
Finally, inflation can be caused by federal taxes put on consumer products such as cigarettes or
fuel. As the taxes rise, suppliers often pass on the burden to the consumer; the catch, however, is
that once prices have increased, they rarely go back, even if the taxes are later reduced.
War:
Wars are often cause for inflation, as governments must both recoup the money spent and repay
the funds borrowed from the central bank. War often affects everything from international
trading to labor costs to product demand, so in the end it always produces a rise in prices.
2.4: Growth-Inflation Rate from 1971-2013:
Table 1:
Year GDP Growth Rate Inflation Rate
1971 -5.47 2.96
1972 -13.97 4.40
1973 3.32 61.40
1974 9.59 44.54
1975 -4.08 80.56
1976 5.66 -17.63
1977 2.67 -3.21
12. 12
The Growth-Inflation relationship in Bangladesh 2014
2011 6.70 7.53
2012 6.23 8.48
2013 6.03 6.62
2014 - -
Source: World Bank
2.5: Data Analysis:
In view of visualizing the relationship between inflation and GDP growth in Bangladesh, several
Statistical tables and charts containing CPI inflation, real GDP during the period from 1971 to
2013 are used. The last row of Table-1 depicts the average inflation and growth of Real GDP for
four decades. After the liberation war in Bangladesh it was quite understandable that the rate of
inflation was higher and GDP growth was lower. From FY1971 to FY1981 the average inflation
rate was 21.75 percent that was reason of the lower GDP growth rate at 1.29 percent. It is seen
from the Table-1 that during the decade of FY82 to FY91, the inflation rate was around 9.12
percent, while the GDP growth was 3.67 percent. During the decade of FY92 to FY01, the CPI
inflation rate decreased significantly from around 10 percent to 3.50 percent, and the GDP
growth increased moderately to 4.98 percent from 3.93 percent. During the decade of FY02 to
FY13, however, the real GDP growth increased to around 6 percent, the CPI inflation also
increased to around 6 percent as well. From the table, it is evident that when money supply was
the highest (i.e., 22 percent), the inflation rate was much higher with lower real GDP growth
(i.e., around 4 percent). During the current decade, the state of inflation, real GDP growth deem
to be optimal as the average CPI inflation and real GDP growth both appeared to be around 6
percent.
14. 14
The Growth-Inflation relationship in Bangladesh 2014
Chart 1: Growth-Inflation Rate Relationship
Chart-1 shows the relationship between the CPI inflation and real GDP growth for the period
1977-78 to 2009-10. It is evident from the chart that during the late 80s to late 90s, when the
rates of inflation were higher, the corresponding average GDP growth was relatively lower.
During 1990s and 2000s, however, inflation and growth maintained some sort of neutral
relationship. Although from FY04 onward matching with the period of flexible exchange rate
regime, the real GDP growth was relatively higher corresponding to relatively lower rates of
inflation. It can also be noted from the chart that the relationship between inflation and growth is
not linear that might go through some structural breaks requiring further investigation.
Table 2: Average Growth-Inflation in last four decades.
Fiscal Year Average Inflation Rate Average Growth rate
FY 1971-1981 21.75 1.29
FY 1982-1991 9.12 3.67
FY 1992-2001 3.50 4.98
FY 2002-2013 6.14 6.02
Table-2 contains the data on inflation and real GDP growth in Bangladesh for the last 42 years
(1975-76 to 2011-12) in a way that various levels of GDP growth are recorded against a low-to-
high sequence of inflation levels. The recorded data show that when the rates of inflation are
around 20 percent the corresponding average GDP growth is around 1.50 percent in FY70s. It is
15. 15
The Growth-Inflation relationship in Bangladesh 2014
also seen from the table that when inflation rates are between 3 to 3.99 percent, the real GDP
growth is 5 percent. While inflation rates are in between 7 to 7.99 percent, the corresponding
average real GDP growth rate is one of the highest at 5.94 percent for 4 different years. Beyond
the 7.99 percent inflation, the average real GDP growth started to moderate. Thus the above
variety relationship between inflation and GDP growth indicates some sort of non-linearity with
a structural break or inflexion point when the relationship between inflation and GDP growth
switched.
2.6 Limitations of Economic system
The quarterly data on budget deficit and government expenditures are not available, which
hinders the analysis on the supply side determinants of inflation. The wage rate is not considered
here because of the developing country nature, Labor is assumed to be abundant. The key
findings:
Inflation in Bangladesh can be explained by money supply growth as money supply has
statistically significant power of forecasting the movement in CPI. It might be channeled through
either the effects of money supply on GDP or the effects of money supply on exchange rates.
The deposit rate of interest is a relatively weak determinant of fluctuations in inflation in
Bangladesh, whereas deposit rate of interest is a moderately strong determinant of nominal
exchange rate, but only in the short run.
16. 16
The Growth-Inflation relationship in Bangladesh 2014
Money supply is a moderate determinant of fluctuation in real output, at the same time; money
supply is a moderately strong determinant of fluctuation in nominal exchange rate in Bangladesh
during the period FY90-FY10.
18. 18
The Growth-Inflation relationship in Bangladesh 2014
3. Conclusion:
These results have important policy implications for both domestic policy makers and the
development partners.
First, taking into consideration that the inflation rate is not indexed in the wages and salaries,
inflation will lead to a decrease in the purchasing power and an increase in the cost of living.
Second, given that the country frequently has to balance the credit requirements by the private
and public sector against both inflationary and balance of payments pressures, it is not always
possible for the monetary authority to increase (or adjust) the nominal interest rate above the
expected (or actual) inflation rate through contractionary monetary policy 11. In this regard, the
monetary authority can think of an alternative way by working on the expectations channel to
reduce inflation. This requires credibility of the monetary authority in following through its
monetary program as communicated in advance to the stakeholders.
19. 19
The Growth-Inflation relationship in Bangladesh 2014
References:
Chief economist’s unit and monetary department, Bangladesh bank “ Monetary Policy
Statement”, July – December 2014.
World Bank Website.
IMF Website.
Sadia Afrin, “ Fiscal Deficit and Inflation: The case of Bangladesh”, July1, 2013.
The Innovators, Centre for research and action on development, “Bangladesh Economic
Update – Growth, Tax, Inflation and Consumers”, July 2010.
The Innovators, Centre for research and action on development, “Bangladesh Economic
Update – Inflation Unemployment and Growth Trajectory”, October 2010.
Shamim Ahmed and Md. Golam Mortaza, “Inflation and Economic Growth of
Bangladesh: 1981-2005”, December 2005.
Dr. Sayera Younus, “Estimating Growth-Inflation tradeoff threshold in Bangladesh”.
Quamrul Asraf, Peter Howitt and, Boris Greshman, “How Ination A_ects
Macroeconomic Performance: An Agent-Based Computational Investigation” June -
2013.
The Financial Express, “Inflation and food security in Bangladesh: Recent trends”,
Anniversary Issue 2011.
Bangladesh Bureau of Statistics.