- Title
- An examination of some issues in the conduct of monetary policy in Bangladesh
- Creator
- Hossain, Akhtar
- Relation
- Development Issues of Bangladesh-II p. 269-303
- Relation
- http://www.bdiusa.org/Publications/Books/Book2.shtml
- Publisher
- Bangladesh Development Initiative (BDI) / Dhaka University Press Ltd.
- Resource Type
- book chapter
- Date
- 2003
- Description
- This paper examines some issues in the conduct of monetary policy in the emerging market economy of Bangladesh. It suggests that the objective of monetary policy, from a global perspective, should be achieving and sustaining price stability, meaning a low and stable inflation of, say, around 2 percent per annum as a means to establish a well-functioning, fast growing economy. In order to determine which monetary policy framework would be appropriate for achieving such price stability, the paper reviews the exchange rate peg, monetary target and inflation target as nominal anchors in the context of Bangladesh. By considering its present economic structure and institutional arrangements, the paper considers both the exchange rate peg and inflation targeting inappropriate for Bangladesh. However, two inter-related empirical findings, such that there exists a stable money demand function and there is causal relationship running from money supply growth to inflation, provide some support for monetary targeting, with a proviso that there is increased flexibility in interest and exchange rates. It is argued that in the absence of flexibility in interest and exchange rates, there could be an in-built instability in inflation, under monetary targeting, originating from domestic real and external shocks.
- Subject
- monetary policy; Bangladesh; price stability; exchange rate peg; monetary target; inflation target
- Identifier
- uon:2553
- Identifier
- http://hdl.handle.net/1959.13/29395
- Identifier
- ISBN:9840516574
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