Monetary Policy Challenges in Bangladesh: A Regulatory and Banking Perspective

Year 2024, Issue: 99, 23 - 41, 30.06.2024

Masud Rana

Abstract

The objective of this study is to identify challenges encountered by regulators and commercial banks in implementing monetary policy in Bangladesh. The primary data for the research was gathered through interviews with 207 participants from Bangladesh Bank and 19 listed private conventional commercial banks, using a structured questionnaire. The collected data was then analyzed and interpreted using descriptive statistical measures and advanced multivariate techniques, specifically Varimax Rotated Factor Analysis. The study highlights significant challenges for regulators and commercial banks in implementing monetary policy, with a focus on adjusted mean scores. These challenges are ranked from 1 to 29 based on their respective mean scores. The most prominent issue identified is the liquidity trap in the money market, ranked first, while the least practical concern is the central bank's inability to predict the impact of monetary policy on the real level of economic activity, ranked 29th. Additionally, the researcher conducted a ranking of factor variables through Varimax Rotated Factor Analysis. The most crucial factors include economic stability and governance, the inadequate shock absorption capacity of MPS, the absence of a connection to the real economy, consistent policy shifts, regulatory constraints, liquidity constraints posing as government control, and insensitivity of monetary policy.

Keywords

Monetary Policy, Challenges, Central Bank, Bangladesh.

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