Influence of Some Macroeconomic Variables on Inflation-An Econometric Enquiry
Journal of World Economic Research
Volume 6, Issue 3, June 2017, Pages: 27-33
Received: Sep. 1, 2016; Accepted: Mar. 8, 2017; Published: May 17, 2017
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Author
Amit Kundu, Department of Economics, Mathabhanga College, Cooch Behar, India
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Abstract
The study analyzed the impact of exchange rate, money supply, interest rate and government expenditure on inflation of Bangladesh by using time series data from 1976-2010 by employing Bound Testing approach. The analysis demonstrates that in the long-run, rate of change of exchange rate has negative effect on inflation. Money supply and interest rate have no significant effect on inflation, and government expenditure has a positive effect on inflation. While in the short-run, the results indicate directional causality taking inflation as dependent variable with other macro-economic variables like exchange rate, money supply, interest rate and government expenditure. It is manifest that inflation is sensitive to changes both interest rate and government expenditure in the short run. Therefore, the government should realise effective macro-economic policies that is effective for economical progress in the short run. The policy implication is that in Bangladesh to lessen inflation momentum the government will have to pursue a monetary and fiscal policy which matches with the actual scenario of real sectors and monetary sectors.
Keywords
ARDL, Bound Testing, Error Correcting Term, Exchange Rate, Govt. Expenditure Inflation, Interest Rate, Money Supply
To cite this article
Amit Kundu, Influence of Some Macroeconomic Variables on Inflation-An Econometric Enquiry, Journal of World Economic Research. Vol. 6, No. 3, 2017, pp. 27-33. doi: 10.11648/j.jwer.20170603.11
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Copyright © 2017 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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