International Journal of Business and Economics Volume 17, No. 3 December, 2018

Determinants of Inflation in Bangladesh: An Econometric Approach

Dewan Muktadir-Al-Mukit

Faculty of Business Administration, Eastern University, Bangladesh

Abstract

This study investigates the determinants of inflation from the perspective of an Asian emerging economy, Bangladesh, between 1977 and 2014. We explore both demand-side and supply-side factors causing inflation in Bangladesh, using econometric techniques for measuring the long-term and short-term relationship between variables under the concept of the Co-integration and Error Correction Model. Investigating causal relationships using the Granger causality test, the results reveal the existence of a stable long-run significant relationship of inflation with real GDP, money supply, imports, interest rate, remittances, and exchange rate. The findings herein suggest that the causes of inflation in Bangladesh are multi-dimensional and dynamic, and therefore the government should adopt proper strategies to curb inflation in the country.

Keywords：inflation, Co-integration, Granger causality, Bangladesh.

JEL Classifications：C10, E31.

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