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Inflation and Economic Growth: An Empirical Evidence of Bangladesh (1986-2016)

Author

Listed:
  • Khairul Kabir Sumon

    (Department of Finance and Banking, Begum Rokeya University, Rangpur, Bangladesh,)

  • Md. Sazib Miyan

    (Department of Finance and Banking, Begum Rokeya University, Rangpur, Bangladesh)

Abstract

The study is conducted to examine empirically the relationship between inflation and economic growth in Bangladesh using annual data set from 1986 to 2016. Moreover to formulate policy issue, it was needed to find the threshold level of inflation for Bangladesh. Based on the results of two steps Engle-Granger and Johansen Co-integration test, it confirms that there is statistically significant positive relationship between inflation and economic growth. The results of the error correction model, specifically the sign of the one period lagged error correction term confirm that inflation adjust itself to long-run path approximately at the speed of 79% in each year. Finally based on the Conditional Least Square (CLS) method the forecasted threshold level of inflation is 8%; any rate beyond this, does not significantly influence the growth rate.

Suggested Citation

  • Khairul Kabir Sumon & Md. Sazib Miyan, 2017. "Inflation and Economic Growth: An Empirical Evidence of Bangladesh (1986-2016)," International Journal of Economics and Financial Issues, Econjournals, vol. 7(5), pages 454-464.
    • Handle: RePEc:eco:journ1:2017-05-54
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    References listed on IDEAS

    as
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    Cited by:

    1. Ely Susanti & Maimun Sholeh, 2020. "Indonesia Economic Growth Determinant: The Impact of Macro Economic Variables and International Trade," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 70-76.
    2. Md. Sayebur Rahman, 2023. "Exploring the Impact of Inflation on Economic Development in Bangladesh," International Journal of Science and Business, IJSAB International, vol. 19(1), pages 87-96.

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    More about this item

    Keywords

    Economic Growth; Inflation; Threshold Level Of Inflation; Co-Integration; Error Correction Model; Conditional Least Square;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models

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