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Financial Liberalization, Savings and the Banking Sector in Bangladesh

Author

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  • Syed Mansoob Murshed
  • Iftekhar Ahmed Robin

Abstract

This article explores the consequences of financial liberalization policy on the banking sector in Bangladesh. Following a motivating portfolio selection theor-etical model on the impact of liberalization, it applies time series techniques with annual banking sector data for the period 1981–2008. The study suggests that the main objective of financial liberalization to promote domestic private savings by raising real interest rates has not worked. No significant positive correlation is observed between domestic private savings and the real deposit interest rate. JEL: E21, E44, E42, C22

Suggested Citation

  • Syed Mansoob Murshed & Iftekhar Ahmed Robin, 2012. "Financial Liberalization, Savings and the Banking Sector in Bangladesh," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 13(1), pages 69-83, March.
    • Handle: RePEc:sae:soueco:v:13:y:2012:i:1:p:69-83
    DOI: 10.1177/139156141101300104
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    References listed on IDEAS

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    1. Gupta, Kanhaya L, 1987. "Aggregate Savings, Financial Intermediation, and Interest Rate," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 303-311, May.
    2. Engelbert Stockhammer, 1999. "Robinsonian and Kaleckian Growth. An Update on Post-Keynesian Growth Theories," Department of Economics Working Papers wuwp067, Vienna University of Economics and Business, Department of Economics.
    3. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    4. Abdur Chowdhury, 2001. "The Impact of Financial Reform on Private Savings in Bangladesh," WIDER Working Paper Series DP2001-78, World Institute for Development Economic Research (UNU-WIDER).
    5. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    6. Phillip Arestis & Michelle Baddeley & John S.L. McCombie (ed.), 2005. "The New Monetary Policy," Books, Edward Elgar Publishing, number 3536.
    7. Tony Addison & Abdur Chowdhury & Mansoob Murshed, 2002. "By How Much Does Conflict Reduce Financial Development?," WIDER Working Paper Series DP2002-48, World Institute for Development Economic Research (UNU-WIDER).
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    2. Muhammad Shahbaz & Ijaz Ur Rehman & Ahmed Taneem Muzaffar, 2015. "Re-Visiting Financial Development and Economic Growth Nexus: The Role of Capitalization in Bangladesh," South African Journal of Economics, Economic Society of South Africa, vol. 83(3), pages 452-471, September.

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    More about this item

    Keywords

    Financial liberalization; domestic private savings; interest rate; cointegration;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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