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Deficit Financing and Inflation in Bangladesh: A Vector Autoregressive Analysis

Author

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  • Kreiter, Zebulun
  • Paul, Tapas Kumar

Abstract

This paper analyses the dynamics of inflation in Bangladesh using vector autoregressive methods over the period from July 1999 to August 2008. Demand side factors are assessed in comparison with cost-push influences with a particular focus on the role of government borrowing from the domestic banking system. Over the sample period, previous values of inflation are the most significant source of inflation in the short-term, followed by net credit to the government. The results suggest that the management of expectations and the mode of budget financing are the most important focus areas for future price stability efforts.

Suggested Citation

  • Kreiter, Zebulun & Paul, Tapas Kumar, 2010. "Deficit Financing and Inflation in Bangladesh: A Vector Autoregressive Analysis," MPRA Paper 45981, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:45981
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    File URL: https://mpra.ub.uni-muenchen.de/45981/1/MPRA_paper_45981.pdf
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    References listed on IDEAS

    as
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    3. Abbas Alavirad & Sanhita Athawale, 2005. "The impact of the budget deficit on inflation in the Islamic Republic of Iran," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 29(1), pages 37-49, March.
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    More about this item

    Keywords

    Inflation; Bangladesh; deficit financing; vector autoregressive model;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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