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Foreign Exchange Reserves: Bangladesh Perspective

Author

Listed:
  • Md. Zahangir Alam

    (Assistant Professor of Finance, Department of Business Administration, International Islamic University Chittagong-Dhaka Campus)

  • Muhammad Abdur Rahim

    (Senior Executive officer, Main Branch, Mercantile Bank Limited, Dhaka-1200, Bangladesh)

Abstract

This study is about foreign exchange reserves of Bangladesh. The main purpose of this study is to the influence of exchange rates on foreign exchange reserves to the Bangladeshcontext. Both the primary and secondary data has been used in this study. The primary data has been collected through a structured questionnaire from 50 respondents. The secondary data, namely Bangladeshforeign exchange reserves (FER), Bangladeshcurrent account balance (CAB), Bangladeshcapital and financial account balance (CFAB), and BDT/USDexchange rates (ER). This study covers yearly data from July 01, 1996 to June 30, 2005 and quarterly data from July 01, 2005 to June 30, 2012. Findings of this study shows that out of the selected 16 factors affecting foreign exchange reserves, exchange rates occupy the first position, weighted average score (WAS) being 4.56. Foreign exchange reserves (FER) and current account balance (CAB) have increased by 502.9087% and 1451.218%, whereas capital and financial account (CFAB) has decreased by -649.024% on June 30, 2012 compared to June 30, 1997. The influence of other factors held constant, as ER changes by 285.6894 units due to oneunit change in FER, on average in the same direction which represents that ER has positive effect onthe FER and this relationship is statistically significant. 62.1526 percent of the variation in FER is explained by ER. The outcomes of Breusch-Godfrey test (LM test), ARCH test, and the Normality test are that there is a serial correlationamong residuals, the variance of residuals is not constant, and the residuals are not normally distributed.

Suggested Citation

  • Md. Zahangir Alam & Muhammad Abdur Rahim, 2013. "Foreign Exchange Reserves: Bangladesh Perspective," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 2(4), pages 01-12, October.
    • Handle: RePEc:rbs:ijfbss:v:2:y:2013:i:4:p:01-12
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    References listed on IDEAS

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