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Exchange Rate Responses to Inflation in Bangladesh

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  • Mr. Akhtar Akhtar Hossain

Abstract

This paper investigates the exchange rate responses to inflation in Bangladesh during the period from 1972-73 to 1999. Both annual and monthly data are used in the investigation. The results suggest that past consumer price inflation generally led to currency devaluation, measured as a decline in the value of the currency in terms of the trade-weighted nominal effective exchange rate. The effect of inflation on devaluation, however, became weaker following the financial reforms undertaken in the early 1980s. The effect of devaluation on inflation was not significant, and this result remained robust throughout the sample period.

Suggested Citation

  • Mr. Akhtar Akhtar Hossain, 2002. "Exchange Rate Responses to Inflation in Bangladesh," IMF Working Papers 2002/166, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2002/166
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    References listed on IDEAS

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    1. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
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    Cited by:

    1. Raihan, Selim, 2013. "The Political Economy of Food Price Policy: The Case of Bangladesh," WIDER Working Paper Series 002, World Institute for Development Economic Research (UNU-WIDER).
    2. Khatun, Fahmida & Ahamad, Mazbahul G., 2012. "Investigating the determinants of inflationary trends in Bangladesh: an ARDL bounds F-Test Approach," MPRA Paper 42572, University Library of Munich, Germany.
    3. Dr Mirza Azizul Islam, 2003. "Exchange Rate Policy of Bangladesh: Not Floating Does Not Mean Sinking," CPD Working Paper 20, Centre for Policy Dialogue (CPD).
    4. Khan, Zakir Saadullah & Hossain, M Ismail, 2010. "Democracy and Trade Balance: A Vector Autoregressive Analysis," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 33(4), pages 23-37, December.
    5. Boukraine, Wissem, 2020. "Short and long-run determinants of inflation in Tunisia," MPRA Paper 102014, University Library of Munich, Germany.
    6. Selim Raihan, 2013. "The Political Economy of Food Price Policy: the Case of Bangladesh," WIDER Working Paper Series wp-2013-002, World Institute for Development Economic Research (UNU-WIDER).
    7. J.O. Adeniran & S.A. Yusuf & Olatoke A. Adeyemi, 2014. "The Impact of Exchange Rate Fluctuation on the Nigerian Economic Growth: An Empirical Investigation," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(8), pages 224-233, August.
    8. Nephil Matangi Maskay, 2003. "Patterns of Shocks and Regional Monetary Cooperation in South Asia," IMF Working Papers 2003/240, International Monetary Fund.
    9. Bodrun Nahar & Mahinda Siriwardana, 2009. "Impact of Trade Liberalization on Poverty in Bangladesh," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 10(2), pages 325-369, July.
    10. Penu, Samuel Lucky & Nkanbia-Davies, Lilian Okorite, 2017. "Implications of Exchange Rate Fluctuation and Economic Performance: The Nigerian Experience," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 3(10), pages 206-217, 10-2017.
    11. Quader, Syed Manzur, 2004. "Floating Exchange Rate Regime," MPRA Paper 26163, University Library of Munich, Germany.
    12. Monir Uddin Ahmed & Md. Moniruzzaman Muzib & Md. Mahedi Hasan, 2016. "Inflation, inflation uncertainty and relative price variability in Bangladesh," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 6(3), pages 389-427, December.
    13. Hossain, A., 2005. "Granger-Causality Between Inflation, Money Growth, Currency Devaluation and Economic Growth in Indonesia, 1951-2002," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 2(3), pages 45-68.

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    WP; price level;

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