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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.

Monday, November 14, 2011

Inflation projections

Prof. M.A. Taslim writes on the current states on the Bangladesh economy in his article 'Economic growth and the state of the economy' with special focus on inflation projections over the medium term.

Unlike the policymakers, I also believe with the last paragraph of his article:

"When inflation expectations become embedded, a substantial reduction in monetary growth will not have much immediate effect. It may take 12-18 months before a monetary contraction is reflected in price reductions. It would thus seem that the economy will suffer from inflation for at least a couple of years even if corrective actions are taken within a short time.  The high inflation could dampen the growth momentum of the economy."

Here is the link of the article.

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