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Monetary policy transmission in Bangladesh: Exploring the lending channel

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  • Afrin, Sadia

Abstract

The monetary policy transmission mechanism of Bangladesh, especially the lending and exchange rate channels remain largely unexplored during the period of market based monetary policy instruments and the managed float exchange rate regime. This paper analyzes these transmission channels and finds that the monetary aggregates targeting framework is still effective in influencing price level. Bank lending plays a non-trivial role, while the exchange rate channel is less effective in the transmission process, suggesting a high degree of intervention in the foreign exchange market. External shocks appear important for the macro aggregates and domestic credit boom appear inflationary, in which the central bank plays a stabilizing role.

Suggested Citation

  • Afrin, Sadia, 2017. "Monetary policy transmission in Bangladesh: Exploring the lending channel," Journal of Asian Economics, Elsevier, vol. 49(C), pages 60-80.
  • Handle: RePEc:eee:asieco:v:49:y:2017:i:c:p:60-80
    DOI: 10.1016/j.asieco.2016.10.003
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    References listed on IDEAS

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    More about this item

    Keywords

    Credit; Monetary policy; Structural VAR;

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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