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Investigating the determinants of inflationary trends in Bangladesh: an ARDL bounds F-Test Approach

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Listed:
  • Khatun, Fahmida
  • Ahamad, Mazbahul G.

Abstract

Inflation appears to have emerged as a perennial phenomenon in Bangladesh in the recent past. High inflationary trend that began to show up since the second quarter of FY2010 continued throughout FY2011 and FY2012. In this regard, an empirical examination to explore the major sources of inflation is necessary for effective policy suggestions towards curbing inflationary pressure, ensuring price stability and attaining the desired economic growth. This paper investigates major determining factors of inflationary trends in Bangladesh during the period FY1981 to FY2009. An unrestricted error-correction model (UECM) version auto-regressive distributed lag (ARDL) bounds F-test is employed to find out the short run and long run elasticities of the determinants of inflation. Empirical result reveals that domestic rice production affects inflation negatively in the short run to a significant extent. Conversely, domestic petroleum price and broad money (M2) supply have low but positive impact on inflationary trends. This suggests that increased domestic rice production and effective fiscal-monetary integration are the crucial policy options to curb the inflationary pressure in Bangladesh.

Suggested Citation

  • Khatun, Fahmida & Ahamad, Mazbahul G., 2012. "Investigating the determinants of inflationary trends in Bangladesh: an ARDL bounds F-Test Approach," MPRA Paper 42572, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:42572
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    References listed on IDEAS

    as
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    Cited by:

    1. Mohammad Mahabub Alam, 2018. "The Determinants of CPI Inflation in Bangladesh, 1980-2016," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 6(4), pages 441-461, December.

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    More about this item

    Keywords

    Inflation; Bangladesh; ARDL bounds F-test;
    All these keywords.

    JEL classification:

    • 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
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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