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Macroeconomic Stability in Bangladesh: Unraveling the Nexus between Exchange Rate, Inflation, and Export Dynamics through Nonlinear Modeling

Author

Listed:
  • A. H. M. Shahriar

    (Department of Finance and Banking, Jashore University of Science and Technology, Bangladesh)

  • Al Amin Biswas

    (Department of Finance and Banking, Jashore University of Science and Technology, Bangladesh)

  • Nishat Rumaly

    (Department of Finance and Banking, Jashore University of Science and Technology, Bangladesh)

  • Md. Johir Rayhan

    (Department of Banking and Insurance, University of Dhaka, Bangladesh)

  • Mohammad Jahangir Alam

    (Department of Accounting and Information Systems, Jashore University of Science and Technology, Bangladesh)

  • Uttam Golder

    (Department of Finance and Banking, Jashore University of Science and Technology, Bangladesh)

Abstract

This study explores the effects of exchange rate and inflation on the export of goods and services in Bangladesh. Applying Nonlinear Autoregressive Distributed Lag (NARDL) model and using data from 1987 to 2021, in the case of a negative shock, this study finds a significant negative long-run association of exchange rate and inflation with export. Besides, in the case of positive shock, we see a meaningful positive relationship between inflation and exports. Following the findings, this study suggests exchange rate and inflation to ensure stability in Bangladesh’s economy through the issuance of new policies considering the reduction of inflationary pressures, formulation of contractionary monetary policy, recapping exchange-traded funds, and modification of exchange rate determination.

Suggested Citation

  • A. H. M. Shahriar & Al Amin Biswas & Nishat Rumaly & Md. Johir Rayhan & Mohammad Jahangir Alam & Uttam Golder, 2024. "Macroeconomic Stability in Bangladesh: Unraveling the Nexus between Exchange Rate, Inflation, and Export Dynamics through Nonlinear Modeling," International Journal of Economics and Financial Issues, Econjournals, vol. 14(6), pages 174-181, October.
    • Handle: RePEc:eco:journ1:2024-06-19
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    More about this item

    Keywords

    Export; Inflation; Exchange Rate; NARDL; Bangladesh;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F3 - International Economics - - International Finance

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