Exploring the Impact of Inflation on Economic Development in Bangladesh

Md. Sayebur Rahman
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Md. Sayebur Rahman: Department of Finance and Banking, Begum Rokeya University, Rangpur.

International Journal of Science and Business, 2023, vol. 19, issue 1, 87-96

Abstract: A moderate and stable inflation rate helps a country's development and hence economic growth. A modest degree of inflation supplements savers' returns, boosts investment, and thereby promotes a country's economic growth. This article empirically investigates the current link between inflation and economic development in Bangladesh, utilizing data on GDP growth and GDPD as a proxy for inflation from 1960 to 2018. The Granger Causality Test, unit root test, Co-integration, and VECM were used to evaluate empirical data. According to the empirical data, there is a statistically substantial long-run negative association between GDPD and GDP, demonstrating an adverse correlation between inflation and economic development. Again, data showed that there is long-run positive causation between GDP and GDPD. Furthermore, the threshold level of inflation has a beneficial outcome on economic growth, but inflation has a detrimental influence on economic growth if it reaches the threshold level. The key policy implications of the empirical findings are summarized in this study.

Keywords: Country's development; Inflation; Economic Growth; Cointegration; VECM; Granger Causality. (search for similar items in EconPapers)
Date: 2023
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