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Exchange Rate Pass-Through in Bangladesh's Export Prices: An Empirical Investigation

Author

Listed:
  • Mohammad Mainul Hoque

    (Research Fellow, Bangladesh Institute of Development Studies (BIDS), Dhaka, Bangladesh.)

  • Abdur Razzaque

    (Assistant Professor, Department of Economics , University of Dhaka, Dhaka, Bangladesh.)

Abstract

In view of changes in legal, institutional and policy frameworks in the financial system of Bangladesh under the Financial Sector Reform Program (FSRP) initiated in the early 1990s, the paper attempted to empirically investigate whether bank lending and exchange rate channels exist in the economy through which monetary policy changes can influence aggregate output and prices. An assessment of the empirical evidence has been established through the unrestricted vector autoregressions (VARs) approach using quarterly data for the period of July-September 1979 to April-June 2005. The results of the empirical analysis suggest weak existence of both bank lending and exchange rate channels in the Bangladesh economy for the full-sample period as well as in the sub-sample period (i.e., January-March 1990 to April-June 2005). These findings have important implications with respect to the operation of monetary policy. Specifically, knowing the distinct active channels of monetary transmission in the economy would guide the monetary authority in formulating and conducting monetary policy pursuant to its objectives under the current regime, i.e., floating exchange rate and market based monetary policy instruments

Suggested Citation

  • Mohammad Mainul Hoque & Abdur Razzaque, 2004. "Exchange Rate Pass-Through in Bangladesh's Export Prices: An Empirical Investigation," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 30(1-2), pages 35-64.
    • Handle: RePEc:ris:badest:0455
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    References listed on IDEAS

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    Cited by:

    1. Md Deluair Hossen, 2023. "Exchange Rate Pass-Through and Data Frequency: Firm-Level Evidence from Bangladesh," Papers 2303.04101, arXiv.org.
    2. To Thi Kim Hong, 2015. "Effect of exchange rates and gasoline price on export price of Vietnamese coffee," Ho Chi Minh City Open University Journal of Science - Economics and Business Administration, Ho Chi Minh City Open University Journal of Science, Ho Chi Minh City Open University, vol. 5(2), pages 29-36.

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