Inflation and Economic Growth: An Empirical Evidence of Bangladesh (1986-2016)

Khairul Kabir Sumon and Md. Sazib Miyan
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Khairul Kabir Sumon: Department of Finance and Banking, Begum Rokeya University, Rangpur, Bangladesh,
Md. Sazib Miyan: Department of Finance and Banking, Begum Rokeya University, Rangpur, Bangladesh

International Journal of Economics and Financial Issues, 2017, vol. 7, issue 5, 454-464

Abstract: The study is conducted to examine empirically the relationship between inflation and economic growth in Bangladesh using annual data set from 1986 to 2016. Moreover to formulate policy issue, it was needed to find the threshold level of inflation for Bangladesh. Based on the results of two steps Engle-Granger and Johansen Co-integration test, it confirms that there is statistically significant positive relationship between inflation and economic growth. The results of the error correction model, specifically the sign of the one period lagged error correction term confirm that inflation adjust itself to long-run path approximately at the speed of 79% in each year. Finally based on the Conditional Least Square (CLS) method the forecasted threshold level of inflation is 8%; any rate beyond this, does not significantly influence the growth rate.

Keywords: Economic Growth; Inflation; Threshold Level Of Inflation; Co-Integration; Error Correction Model; Conditional Least Square (search for similar items in EconPapers)
JEL-codes: C13 C32 C51 C52 E31 O42 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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