Impact of Monetary Policy on the Economic Growth of a Developing Country: An Empirical Study on Bangladesh Economy

Rahman, Md. Nafizur; Nower, Nowshin; Tushar, Raqibul Hasan; Abbas, Syed Mahdee; Musa, Maisha Nanjiba

doi:10.2139/ssrn.3391280

Cited by 7 publications

(8 citation statements)

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“…In terms of the studies on CRR and economic competitiveness, Adeagbo (2021) reported that CRR stabilized the Nigerian economy between 1971 and 2018. Also, Rahman, Nower, Tushar, Abbas, and Musa (2019) affirmed that the CRR improved the stability of the Bangladesh economy. Also, Amiri and Gang (2018) evidenced that, CRR improved the stability of the African economy from 1970 down to year 2016.…”

Section: Empirical Studiesmentioning

confidence: 87%

Monetary Policy Dynamics and the Nigeria’s Global Competitiveness: The Missing Link

Agbogun,

Oshiobugie,

Oboro

2024

J. Bus. Manag. Econ. Development.

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Despite the series of monetary policies adopted by the Nigerian government over time, the (Nigerian) economy in comparison to other countries in the world like South Africa, the USA, Ghana, and the like is still improvised. Still, inconsistency between monetary policy formulation and implementation remains another major issues yet unattended to. It is in this regards that, the current study is dedicated towards examining the effect of monetary policy dynamics and the Nigeria’s global competitiveness from 1992 to 2021 (i.e., 30 years) using Autoregressive Distributed Lag (ARDL) model. The study disclosed that, the variables are integrated at level and first difference while the ARDL Bound test evidenced that, the series cointegrates. Specifically, monetary policy rate has a positive minimal effect on Nigeria’s global competitiveness, while the CRR improved Nigeria’s global competitiveness significantly. However, both lending rates and exchange rates have a significant negative effect on economic competitiveness. Consequently, the paper concludes that both the cash reserve ratio and the Nigeria’s demeaning state are attributed to the high exchange rate (EXR) and high lending rates. Thus, the paper submits that the current monetary policy rates are sustained and that all DMBS should adhere to the stipulated Cash Reserve Ratio (CRR) since it has improved the Nigeria’s global competitiveness significantly. Lastly, the study confirmed that, the missing link is the policy surmount on the part of the Nigerian government.

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Section: Empirical Studiesmentioning

confidence: 87%

Monetary Policy Dynamics and the Nigeria’s Global Competitiveness: The Missing Link

Agbogun,

Oshiobugie,

Oboro

2024

J. Bus. Manag. Econ. Development.

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“…Also, they did not investigate the long-run and short-run effects of monetary policy on economic growth. Rahman et al (2019) tried to examine the relationship between monetary policy and the economic development of Bangladesh by using multiple regressions. The study identified that the monetary policy of Bangladesh has a significant impact on the economic development of Bangladesh.…”

Section: Monetary Policy and Economic Growth Nexusmentioning

confidence: 99%

“…Monetary policy plays a significant role in developing countries' economic growth by influencing the cost and availability of credit, inflation management, and payment stability (Bondarchuk and Raboshuk, 2020;Twinoburyo and Odhiambo, 2018a). For instance, in Bangladesh, the government has always depended on monetary policy as a way to acquire economic growth (Rahman et al, 2019). The responsibility for formulating and executing monetary policy in Bangladesh lies with the Bangladesh Bank.…”

Section: Introductionmentioning

confidence: 99%

Does the monetary policy have any short-run and long-run effect on economic growth? A developing and a developed country perspective

Islam

Hossain

Chakrobortty

et al. 2021

AJEB

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PurposeThe study aims to empirically examine the relationship between monetary policy and economic growth, as well as to explore the long-run and the short-run effect of monetary policy on the economic growth of a developing country (Bangladesh) and a developed country (the United Kingdom).Design/methodology/approachDepending on data availability, the study employed secondary data covering the period of 1980–2019. The augmented Dickey–Fuller test and the Phillips–Perron test were used for the stationarity test. Further, the F-bounds test was run to justify the long-run relationship between monetary policy and economic growth. Thereafter, long-run coefficients were revealed from the auto-regressive distributed lag (ARDL) model and short-run coefficients from the error correction model. Furthermore, the vector error correction model (VECM) Granger causality approach was employed to demonstrate the causality of studied variables. Lastly, different diagnostics tests ensured the robustness of the models.FindingsF-bounds test outcomes suggest that monetary policy has a long-run relationship with economic growth in both countries. Long-run coefficients revealed that money supply has a positive long-run impact on economic growth in both countries. Unlike the UK, the exchange rate exhibits an adverse effect on the economic growth of Bangladesh. The bank rate seems to promote economic growth for the UK. Findings also depict that increase in lending interest rates hurts the economic growth for both countries. Besides, the short-run coefficients portray random effects at different lags in both cases. Lastly, causality among studied variables is revealed using the VECM Granger causality approach.Originality/valueThe novelty of this study lies in consideration of both developing and developed countries in the same study.

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“…Chowdhury (2019) finds a long-run relationship between monetary policy and macroeconomic variables in the Bangladesh context. Rahman et al (2019) suggest that monetary policy has a significant impact mediating role in economic growth in Bangladesh. The literature overall suggests that monetary policy, particularly, bank rate has significant effectiveness in .…”

Section: Literature Reviewmentioning

confidence: 99%

The impacts of IPO financing and monetary policy on economic growth in Bangladesh: Evidence from a dynamic assessment

Barua¹,

Akter²

2021

JFMG

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Bangladesh is considered a fast-growing emerging economy and the new Asian tiger. The increasing need for capital funds in Bangladesh is largely met by banks, mainly due to the country’s underdeveloped nature of the stock market. Bank financing is assumed to be influenced by monetary policies, particularly, by bank rates adopted each year by the central bank of Bangladesh. On the other hand, while some studies stress the need for strengthening the debt and equity securities markets to support Bangladesh’s fast economic growth, debates swirl about whether or to what extent the stock market contributes to economic growth in the country. To address the understanding gap, in this paper, we examine the impact of capital financing through equity initial public offerings (IPO) and bank rate on the economic growth of Bangladesh. We use annual data from 1981 to 2019 and employ an autoregressive distributive lag (ARDL) framework to examine the long-run and short-run impacts of IPO financing and bank rate on GDP growth rate. Our findings suggest the existence of a long-run cointegrating relationship between IPO financing, bank rate, and GDP growth. We find that IPO financing does not have a significant long-run impact but shows only a one-period short-run positive impact on economic growth. On the other hand, bank rate shows a long-run negative and a one-period short-run positive impact on economic growth. Findings overall suggest that IPO financing does not significantly contribute to long-run economic growth while giving only a temporary boost. Further, increases in bank rate - as one would expect - depress economic growth in the long-run, while generating herd behavior immediately. Our findings stress the need for encouraging more quality IPO issuances, increasing the issuance size, and ensuring proper utilization of the funds by IPO issuers to make the capital market a key driver of economic growth.

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Impact of Monetary Policy on the Economic Growth of a Developing Country: An Empirical Study on Bangladesh Economy

Cited by 7 publications

References 0 publications

Monetary Policy Dynamics and the Nigeria’s Global Competitiveness: The Missing Link

Monetary Policy Dynamics and the Nigeria’s Global Competitiveness: The Missing Link

Does the monetary policy have any short-run and long-run effect on economic growth? A developing and a developed country perspective

The impacts of IPO financing and monetary policy on economic growth in Bangladesh: Evidence from a dynamic assessment

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