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Corresponding Author:
Abdur Rahman Forhad, Northern Illinois University, DeKalb, Illinois, USA

Corresponding Coauthors:
Ghassem A. Homaifar, Middle Tennessee State University, Murfreesboro, Tennessee, USA
Abul Hasnat Muhammed Salimullah, Middle Tennessee State University, Murfreesboro, Tennessee, USA

Monetary Policy Transmission over the Real Sector of Bangladesh Economy: An SVAR Approach

(pp. 25-46)
JEL classification: E40, E50
Keywords: Bangladesh, Monetary Policy, SVAR


This study examines the effectiveness of the monetary policy transmission of Bangladesh using Structural Vector Autoregressive model (SVAR) for the period of 1972-2014. The SVAR model investigates how a monetary policy shock defined as an unexpected rise in interest rate affects real and nominal macro variables; namely real output, prices, real effective exchange rates, and money supply. Our results suggest that a monetary policy shock does have a short run effect on real output, price level, and exchange rates. A monetary policy shock generates inflationary pressure leading to a devaluation of the Bangladeshi Taka. This paper suggests that the policy makers, to consider the trade-off between output and interest rate of Bangladesh.

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Institute for International Economics
of the Genoa Chamber of Commerce

Istituto di Economia Internazionale
Camera di Commercio di Genova
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