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Exchange Rate Policy under Floating Regime in Bangladesh: An Assessment and Strategic Policy Options

Monzur Hossain () and Mansur Ahmed ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines the exchange rate policy in Bangladesh for the period 2000-08. Regime classification of the paper suggests that Bangladesh maintained a de facto managed floating regime by intervening in the foreign exchange market on a regular basis. This is at odds with the Bangladesh Bank's claim of maintaining de jure floating regimesince end-May 2003. A high exchange rate pass-through is observed along with high market pressure during the period of expansionary monetary policy. Given the thin foreign exchange market and high pass-through effects, it appears difficult for Bangladesh to mainatin a freely floating regime. Although Bangladesh maintained average competitiveness, the currency remained somewhat overvalued. Based on the findings, some pragmatic policies in managing the exchange rate in Bnagladesh have been suggested.

Keywords: Exchange Rate; Floating Regime; Bangladesh (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
Date: 2009-10
New Economics Papers: this item is included in nep-ifn, nep-mon and nep-opm
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Published in Bangladesh Development Studies No. 4.Vol. X(2009): pp. 35-67

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