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Monetary Policy, Output, and Inflation in Bangladesh: A Dynamic Analysis
Applied Economics Letters
  • Abdur Chowdhury, Marquette University
  • Minh Q Dao, Eastern Illinois University
  • Abu N. M. Wahid, Tennessee State University
Document Type
Format of Original
5 p.
Publication Date
Taylor & Francis (Routledge)
This paper investigates the relationship between money, prices, output, and the exchange rate in Bangladesh during the 1974–92 period. Several interesting conclusions can be derived from the paper. First, the inflationary process in Bangladesh cannot be explained exclusively by the monetarist or the structuralist explanation of inflation. Second, regardless of the monetary aggregate employed, monetary policy exerts a significant unidirectional impact on real output. Third, monetary policy and inflation together account for a significant portion of fluctuations in the exchange rate. Finally, it is noted that monetary shocks have a strong, but relatively short-run, impact on inflation. In light of these findings, it can be concluded that monetary policy in Bangladesh should be carried out with extreme caution. While tight money may put a short-term halt to inflation and help stabilize the foreign trade sector, it may also cause a slowdown in the economy.

Applied Economics Letters, Vol. 2, No. 3 (March 1995): 51-55. DOI.

Citation Information
Abdur Chowdhury, Minh Q Dao and Abu N. M. Wahid. "Monetary Policy, Output, and Inflation in Bangladesh: A Dynamic Analysis" Applied Economics Letters (1995) ISSN: 1350-4851
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