Impact of Financial Development and Globalization on Inflation: The Role of Remittance and Economic Growth in Bangladesh
The present study investigates the impact of financial development and globalization on inflation by incorporating foreign remittances and economic growth in inflation function in case of Bangladesh. The study covers the period of 1976Q1-2012Q4. We have applied structural break unit root test to examine integrating properties of the variables. The long run relationship between the variables is examined by applying newly developed cointegration approach by Bayer and Hanck, (2013) accommodating structural breaks in the series. Our results confirm the presence of cointegration between the variables in the presence of structural breaks. We find that financial development increases inflation. Globalization stimulates inflation. Economic growth declines inflation but foreign remittances raises it. The causality analysis reveals the bidirectional causality between financial development and inflation. The feedback effect exists between economic growth and inflation and, same is true for financial development and economic growth. Foreign remittances Granger cause inflation and inflation Granger cause foreign remittances.
|Date of creation:||13 Nov 2013|
|Date of revision:||21 Nov 2013|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Abhijit V. Banerjee & Andrew F. Newman, 1990.
"Occupational Choice and the Process of Development,"
911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-298, April.
- Bruce D. Smith, 2003. "Taking intermediation seriously," Proceedings, Federal Reserve Bank of Cleveland, pages 1319-1377.
- Pengfei Wang & Yi Wen, 2006.
"Inflation dynamics: a cross-country investigation,"
2005-076, Federal Reserve Bank of St. Louis.
- Paresh Kumar Narayan & Seema Narayan & Sagarika Mishra, 2011. "Do Remittances Induce Inflation? Fresh Evidence from Developing Countries," Southern Economic Journal, Southern Economic Association, vol. 77(4), pages 914-933, April.
- Kim, Dong-Hyeon & Lin, Shu-Chin, 2010. "Dynamic Relationship Between Inflation And Financial Development," Macroeconomic Dynamics, Cambridge University Press, vol. 14(03), pages 343-364, June.
- Nigel Pain & Isabell Koske & Marte Sollie, 2006. "Globalisation and Inflation in the OECD Economies," OECD Economics Department Working Papers 524, OECD Publishing.
- Oded Galor & Joseph Zeira, 2013.
"Income Distribution and Macroeconomics,"
2013-12, Brown University, Department of Economics.
- John H. Boyd & Bruce A. Champ, 2003. "Inflation and financial market performance: what have we learned in the last ten years," Working Paper 0317, Federal Reserve Bank of Cleveland.
- Bittencourt, Manoel, 2008.
"Inflation and Financial Development: Evidence from Brazil,"
Working Paper Series
RP2008/14, World Institute for Development Economic Research (UNU-WIDER).
- Bittencourt, Manoel, 2011. "Inflation and financial development: Evidence from Brazil," Economic Modelling, Elsevier, vol. 28(1), pages 91-99.
- Bittencourt, Manoel, 2011. "Inflation and financial development: Evidence from Brazil," Economic Modelling, Elsevier, vol. 28(1-2), pages 91-99, January.
- Manoel Bittencourt, 2008. "Inflation and Financial Development: Evidence from Brazil," Working Papers 67, Economic Research Southern Africa.
- Manoel Bittencourt, 2007. "Inflation and Financial Development: Evidence from Brazil," Ibero America Institute for Econ. Research (IAI) Discussion Papers 165, Ibero-America Institute for Economic Research.
- Bittencourt, Manoel, 2007. "Inflation and Financial Development: Evidence from Brazil," Proceedings of the German Development Economics Conference, Göttingen 2007 1, Verein für Socialpolitik, Research Committee Development Economics.
- Nigel Pain & Isabell Koske & Marte Sollie, 2008. "Globalisation and OECD consumer price inflation," OECD Journal: Economic Studies, OECD Publishing, vol. 2008(1), pages 1-32.
- Robert Mundell, 1963. "Inflation and Real Interest," Journal of Political Economy, University of Chicago Press, vol. 71, pages 280-280.
- Bruno, Michael & Easterly, William, 1998.
"Inflation crises and long-run growth,"
Journal of Monetary Economics,
Elsevier, vol. 41(1), pages 3-26, February.
- Jane Ihrig & Steven B. Kamin & Deborah Lindner & Jaime Marquez, 2010. "Some Simple Tests of the Globalization and Inflation Hypothesis," International Finance, Wiley Blackwell, vol. 13(3), pages 343-375, Winter.
- David Romer, 1993.
"Openness and Inflation: Theory and Evidence,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 108(4), pages 869-903.
- Robert J. Barro & David B. Gordon, 1981.
"A Positive Theory of Monetary Policy in a Natural-Rate Model,"
NBER Working Papers
0807, National Bureau of Economic Research, Inc.
- Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
- Laurence M. Ball, 2006. "Has Globalization Changed Inflation?," NBER Working Papers 12687, National Bureau of Economic Research, Inc.
- Boyd, John H. & Levine, Ross & Smith, Bruce D., 2001. "The impact of inflation on financial sector performance," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 221-248, April.
- Abu N. M. Wahid & Muhammad Shahbaz & Pervaz Azim, 2011.
"Inflation and Financial Sector Correlation: The Case of Bangladesh,"
International Journal of Economics and Financial Issues,
Econjournals, vol. 1(4), pages 145-152.
- Abu N. M., Wahid & Muhammad, Shahbaz & Pervez, Azeem, 2011. "Inflation and financial sector correlation: the case of Bangladesh," MPRA Paper 32935, University Library of Munich, Germany, revised 20 Aug 2011.
- Cecchetti, Stephen G, 2000. "Making Monetary Policy: Objectives and Rules," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 43-59, Winter.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:51675. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.