Welcome to Applied Macroeconomic Centre

A theory is appropriate as long as it fits into the fact; when a theory doesn't fit in the fact, it's wise to walk with the fact.

Thursday, June 30, 2011

Good piece on Transit issue!

Asjadul Kibria from the Prothom Alo writes on Government's speedy moves to complete the important matters related to providing transit facility to India, especially issues related to transit fee. The article, published in the Daily Star, is indeed a good one to read.

Here is the link. 

Interest rates increased on savings certificate

The government has increased interest rates on savings instruments by 0.38-1.07 percentage points to 10.8%-12.1%.

This is probably due to reduced sale in savings certificate during the last couple of months, a result of increased interest rates on deposits by commercial banks. Also, recently, the central banks advised the Government to borrow money from the banking system wisely so that pressures on private sector credit availability lessen. 

In the budget, the Government also reduced the advanced tax levied on earning on savings certificates from 10.0% to 5.0%. 

Tuesday, June 28, 2011

New consumption pattern in HIES 2010

Sajjadur Rahman from the Daily Star summarizes the changes in consumption patter during 2005-2010, revealed in HIES 2010.

One interesting finding: The growth in household's average monthly expenditure (increased by 83.0% to Tk11,200 in 2010) has surpassed that of the average monthly income (increased by 59.0% to Tk11,480 in 2010). How does this explain? Mr. Mustafa Mujeri, Director General of BIDS explains that the quantity and the price of food items has increased during this period, so thus the expenditure. Anything else? What about easy access to finance, or any good expectation for the future? What will be the implications of that for household savings (or, national savings)? 

Wednesday, June 22, 2011

Rethinking Economics

The Finance & Development of the IMF published an exclusive interview (Rethinking Economics in a Changed World) of three Nobel Laureates, Robert Solow, Joseph Sitglitz and Michael Spence, primarily on the change in policy economics after the crisis.  

I took some sentences from their interviews to note, which could also be applied in the context of Bangladesh.

Stiglitz on lessons learned from the crisis: “Another widespread belief was that keeping inflation low and stable was necessary, and almost sufficient, for maintaining high growth and good economic performance. Clearly, that is wrong as well.”

Spence on the renewed role of the central bank: “My takeaway of the general discussion is that inflation continues to be an important policy target, but it can’t be the exclusive focus of central banks.”

Solow on the renewed role of the central bank: "An interesting idea with direct policy implications is to rethink the way the credit mechanism mediates between savers and investors and puts credit to productive use."

Size of the Bangladesh underground economy

So, it's an official one. The Finance Division got the number of the underground (or, shadow) economy, Bangladesh, which varies between 45.0% to 81.0% of GDP. The estimates based on Currency-Demand Approach confirms that the shadow economy was worth between $50.0 billion - $100 billion in 2010!

Previously, the international organizations used to quote the size of the Bangladesh shadow economy between 30.0%-35.0% of GDP.

Now, it's proved by the Finance Division that the level of GDP, if not growth of GDP, is underestimated by a large number.

I have one simple question, nothing political, but mostly institutional of the national statistics division. Does Bangladesh Bureau of Statistics (BBS) really have any systematic approach to estimate GDP of Bangladesh in each year? (why I am thinking so? There are lots of reasons. Food for another day's thought) I have a real doubt. Then how does the finance division estimate the size of the underground economy in terms of GDP?

Anyway, you may like to read a good article on the above news in today's Finance Express wrote by Mr. Shamsul Huq Zahid

Asia 2050 and Bangladesh

Mr. Atiur Rahman, the Central Bank Governor, presented a paper on the 44th Annual Meeting of Asian Development Bank (ADB) in Hanoi, Vietnam recently. The paper contains the strength of the Bangladesh economy including its historical trends of growth, overall macroeconomic management, and various successes achieved the economy so far to become one of the leading economies in the region. Also it includes the challenges of the economy that it needs to address for moving up to a further level of development. And finally it provides guidelines to foreign investors to enjoy the facility for further investment incorporating various visions of the Government. I would term the article, a nice starter to know the Bangladesh economy. Thanks to the Governor for that.    

Here are the links of the paper, published in the Daily Star.

Profile of George Akerlof

The Finance & Development (June 2011) of International Monetary Fund (IMF) makes a profile of Nobel Laureate Economist George Akerlof. It is nicely written and so great to read on the details of this great economist. It is also nice to read Akerlof's views on some basic economic management issues, especially the role of the Government. Here is one of them, 

''With the private economy subject to mood swings, the role of the government is to stabilize the economy through its actions. The government should be like a responsible parent to the economy, neither too authoritarian nor too permissive. Capitalist societies can be tremendously creative, and the government should not be so strict as to interfere with that creativity. But capitalism left to its own devices also runs to excess, and the government’s role is to act as a countervailing force against extravagance.

Wednesday, June 15, 2011

Policy rates up again

Bangladesh Bank again rose its policy rates (repo and reverse repo), the third time within 2 months, by 50 basis points to check credit growth and inflation. So the central bank is still thinking that the higher credit growth could be one of the reasons of continued higher inflation in Bangladesh and it can check the flow using its monetary instruments!

Here is the news link! 

Tuesday, June 14, 2011

Budget documents

I am sure, by now, everyone knows the detail story of Budget for FY2011-2012. For those, who requires the budget document, please visit this link of the website of Finance Division, Ministry of Finance.

Thursday, June 2, 2011

Possible shock on economy

Professor M A Taslim again writes an excellent article on the balance between balance of payments (BoP) position and fiscal deficit of Bangladesh published in BDNEWS24 Opinion. Through both theoretical and empirical analysis, he identifies a few problems of the economy, is going to experience in a short future (twin deficit: a BoP deficit and a fiscal deficit) and possible impact of those (such as impact on interest rate structure, and thus investment; public debt ) on the overall macroeconomy. Finally he points out the future challenges of the Bangladesh Bank (or, the Governor), i.e., how it deals the concern of the fiscal authority (Ministry of Finance) and businessmen on the one hand, and the IMF and a few market oriented economists of the country on the other. Very nice one to read.

Here is the link.