MONETARY POLICY TRANSMISSION EFFECT ON THE REAL SECTOR OF THE BANGLADESH ECONOMY: AN SVAR APPROACH

Md. Forhad, Ghassem A. Homaifar and Abul Hasnat Muhammed Salimullah
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Ghassem A. Homaifar: Middle Tennessee State University, Murfreesboro, TN, USA
Abul Hasnat Muhammed Salimullah: Middle Tennessee State University, Murfreesboro, TN, USA

Economia Internazionale / International Economics, 2017, vol. 70, issue 1, 25-46

Abstract: This study examines the effectiveness of the monetary policy transmission of Bangladesh using Structural Vector Autoregressive model (SVAR) for the period of 1972-2014. The SVAR model investigates how a monetary policy shock defined as an unexpected rise in interest rate affects real and nominal macro variables; namely real output, prices, real effective exchange rates, and money supply. Our results suggest that a monetary policy shock does have a short run effect on real output, price level, and exchange rates. A monetary policy shock generates inflationary pressure leading to a devaluation of the Bangladeshi Taka. This paper suggests that the policy makers, to consider the trade-off between output and interest rate of Bangladesh. L’effetto trasmissione della politica monetaria sul settore reale dell’economia del Bangladesh: un approccio SVAR Questo articolo esamina l’efficacia della politica monetaria del Bangladesh tramite il modello SVAR nel periodo 1972-2014. Tale modello esamina come uno shock di politica monetaria, definito come un aumento inatteso nel tasso di interesse, influenzi le macrovariabili reali e nominali: la produzione reale, il livello dei prezzi e del cambio reale effettivo, l’offerta di moneta. I risultati suggeriscono che uno shock di politica monetaria ha effetto nel breve periodo sulla produzione reale, sul livello dei prezzi e sui tassi di cambio. Uno shock di politica monetaria genera una pressione inflazionistica che porta ad una svalutazione del taka. Secondo questo studio i governi dovrebbero considerare il trade-off tra produzione e tasso di interesse nel Bangladesh.

Keywords: Bangladesh; Monetary Policy; SVAR (search for similar items in EconPapers)
JEL-codes: E40 E50 (search for similar items in EconPapers)
Date: 2017
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