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How to finance investment in Bangladesh: Finding long-run factors in a bounds test method

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  • Biru Paksha Paula

    (Department of Economics, State University of New York at Cortland, NY 13045, USA.)

Abstract

Investment in Bangladesh has been at almost one-fourth of the country’s output since the early 2000s. Consequently, Bangladesh’s growth has also remained stagnant at around 6 percent since then. The question of how to increase investment in Bangladesh has been of crucial discussion of late. This study examines the long run determinants of investment in Bangladesh by applying the bounds test over 1976-2010. There should not be any policy dilemma about the effect of lending rates, which must be reduced to boost investment and domestic credit should be expanded. Further liberalization in trade and finance is recommended since economic openness and financial deepening show a positive impact on capital formation. The policy prescriptions for Bangladesh are not different from those for other nations that embarked on liberalization to augment investment for accelerating growth.

Suggested Citation

  • Biru Paksha Paula, 2014. "How to finance investment in Bangladesh: Finding long-run factors in a bounds test method," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 2(3), pages 13-24, June.
    • Handle: RePEc:lrc:lareco:v:2:y:2014:i:3:p:13-24
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    More about this item

    Keywords

    ARDL Bounds test method; Bangladeshi economy; Capital formation; Investment determinants.;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • P45 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - International Linkages

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