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Exchange Rate Responses to Inflation in Bangladesh

Author/Editor: Hossain, Md. Akhtar
Authorized for Distribution: October 1, 2002
Electronic Access: Free Full Text (PDF file size is 1,203KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: This paper investigates the exchange rate responses to inflation in Bangladesh during the period from 1972-73 to 1999. Both annual and monthly data are used in the investigation. The results suggest that past consumer price inflation generally led to currency devaluation, measured as a decline in the value of the currency in terms of the trade-weighted nominal effective exchange rate. The effect of inflation on devaluation, however, became weaker following the financial reforms undertaken in the early 1980s. The effect of devaluation on inflation was not significant, and this result remained robust throughout the sample period.
Series: Working Paper No. 02/166
Subject(s): Exchange rates | Bangladesh | Inflation | Monetary policy | Devaluation | Economic models
Author's keyword(s): Bangladesh | devaluation | inflation | monetary policy
    Published:   October 1, 2002        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA1662002   Pages:   34
    Price:   US$15.00
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