Impacts of Monetary and Fiscal Policies on Price and Currency Stability in Bangladesh

Abstract

This study investigates the effect of monetary and fiscal policies on inflation and exchange rate in Bangladesh in light of recent high inflation and the currency crisis. The analyses employ data from 1991 to 2022 to examine the ability of monetary and fiscal policies to stabilize the economy by managing inflation and currency fluctuations. The ARDL bounds test approach is utilized to estimate the empirical relationships of the model specification from both monetarist and Keynesian perspectives. The study’s findings reveal that monetary and fiscal policies significantly impact inflation management, with monetary policy playing a more substantial role. The empirical relationship emphasizes that an increase in money supply and government spending positively affect inflation, with money supply having a greater impact on controlling domestic prices. Nevertheless, the study does not provide evidence that monetary and fiscal policies significantly influence exchange rate stabilization. The research indicates that enhancing the export sector, raising the amount of remittance inflows, reducing import reliance by promoting domestic production, prioritizing the reduction of fiscal reliance on monetary policy, and implementing a market-oriented exchange rate mechanism can aid in maintaining economic stability in terms of prices and currency. These outcomes provide valuable insight into the effectiveness of monetary and fiscal policies in stabilizing the economy and offer relevant policy implications for policymakers in Bangladesh.

Keywords

• Money Supply
• Government Spending
• Inflation
• Exchange Rate
• Bangladesh

Bangladeş'te Para ve Maliye Politikalarının Fiyat ve Döviz İstikrarı Üzerindeki Etkileri

Öz

Bu çalışma, Bangladeş'te son dönemde yaşanan yüksek enflasyon ve döviz krizi ışığında para ve maliye politikalarının enflasyon ve döviz kuru üzerindeki etkisini incelemektedir. Analizlerde, para ve maliye politikalarının enflasyonu ve döviz dalgalanmalarını yöneterek ekonomiyi istikrara kavuşturma yeteneğini incelemek için 1991'den 2022'ye kadar olan verilerinden yararlanılmıştır. ARDL sınır testi yaklaşımı, model spesifikasyonunun ampirik ilişkilerini hem parasalcı hem de Keynesyen perspektiflerden tahmin etmek için kullanılmıştır. Çalışmanın bulguları, para ve maliye politikalarının enflasyon yönetimini önemli ölçüde etkilediğini, para politikasının ise daha önemli bir rol oynadığını ortaya koymaktadır Ampirik ilişki, para arzındaki ve hükümet harcamalarındaki artışın enflasyonu olumlu yönde etkilediğini, para arzının yurt içi fiyatları kontrol etmede daha büyük bir etkiye sahip olduğunu vurgulamaktadır. Ancak çalışma para ve maliye politikalarının döviz kuru istikrarını önemli ölçüde etkilediğine dair kanıt sunmuyor. Araştırma, ihracat sektörünün güçlendirilmesi, işçi dövizi girişi miktarının artırılması, yerli üretimi teşvik ederek ithalata bağımlılığın azaltılması, para politikasına mali bağımlılığın azaltılmasına öncelik verilmesi ve piyasa odaklı bir döviz kuru mekanizması uygulanmasının ekonomik istikrarın korunmasına yardımcı olabileceğini gösteriyor. Fiyatlar ve para birimi açısından buu sonuçlar, ekonomiyi istikrara kavuşturmada para ve maliye politikalarının etkinliğine dair değerli bilgiler sağlıyor ve Bangladeş'teki politika yapıcılara ilgili politika sonuçları sunuyor.

Anahtar Kelimeler

• Para Arzı
• Devlet Harcamaları
• Enflasyon
• Döviz Kuru
• Bangladeş

Kaynakça

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