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Impact of Financial Development on Exchange Rate Volatility and Long-Run Growth Relationship of Bangladesh

Author

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  • Humyra Jabeen Bristy

    (Stamford University Bangladesh, Bangladesh.)

Abstract

Empirical results show that exchange rate volatility has a negative impact on the economic growth of Bangladesh. In contrast, this paper endeavors to analyze whether level of financial development of Bangladesh has any impact on the exchange rate volatility and growth relationship. To test this, Ordinary Least Square technique has been used considering the interaction between financial development and exchange rate volatility. The findings of the study confirm that growth of this country is adversely affected by exchange rate variability because of the poorly developed financial market of Bangladesh. As the level of financial development is thin, anticipation of exchange rate fluctuations discourages innovation which in turn lowers the growth of Bangladesh. Hence, despite of exchange rate controls have been in place for a long time, those trades oriented policies failed to raise the long run growth of Bangladesh.

Suggested Citation

  • Humyra Jabeen Bristy, 2014. "Impact of Financial Development on Exchange Rate Volatility and Long-Run Growth Relationship of Bangladesh," International Journal of Economics and Financial Issues, Econjournals, vol. 4(2), pages 258-263.
    • Handle: RePEc:eco:journ1:2014-02-3
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    References listed on IDEAS

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    2. Rajesh Sharma & Pradeep Kautish & D. Suresh Kumar, 2018. "Impact of Selected Macroeconomic Determinants on Economic Growth in India: An Empirical Study," Vision, , vol. 22(4), pages 405-415, December.
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    4. Imrul Hossain Chowdhury, 2020. "Extended Exogenous Growth Model: Application and Investigation the Long-Term Growth Determinants of Bangladesh," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(1), pages 35-53, January.

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    More about this item

    Keywords

    Exchange rate volatility; growth; financial development;
    All these keywords.

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F1 - International Economics - - Trade

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