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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.

Sunday, April 29, 2012

Statement of IMF mission

A mission from the International Monetary Fund (IMF) recently visited Dhaka to discuss budget developments and the near-term macroeconomic outlook, following approval by the IMF’s Executive Board of a three-year arrangement under the Extended Credit Facility (ECF) in mid-April in the amount of US$987 million.

Wednesday, April 18, 2012

IMF Country Report on Bangladesh

The International Monetary Fund (IMF) publishes IMF Country Report No 12/94 on Bangladesh (Request for a Three-Year Arrangement under the Extended Credit Facility) with the following documents: Staff Report, Staff Statement, Press Release and Statement by the Executive Director. You may find the document useful while talking on the relationship between IMF and Bangladesh.

Link of the Report.

Sunday, April 15, 2012

BD EIU Country Report: March 2012

The Economist Intelligence Unit (EIU) publishes its March 2012 edition of Bangladesh Country Report: you may find some of it interesting to read.

Link of the country report.

Saturday, April 14, 2012

More freedom to Chinese currency!

China took a milestone step allowing the yuan to double its trading band size against the dollar. From April 16, 2012, the renminbi exchange rate against the dollar in the spot interbank currency market will be widened from 0.5 percent to 1 percent as the People's Bank of China, the central bank of China said.

News link on the issue.

Thursday, April 12, 2012

IMF approves loan to Bangladesh...

The Executive Board of the International Monetary Fund (IMF) approved a three-year arrangement for Bangladesh under the Extended Credit Facility (ECF) in a total amount equivalent to US$987 million, the largest ever loan of IMF under ECF program.

Please find the following relevant documents:

Four main reform pillars under program objectives: 
1. Moderate fiscal consolidation and sound debt management, supported by tax and public financial management reforms;
2. A restrained monetary policy, anchored by sound fiscal performance and exchange rate and interest rate flexibility;
3. Strengthened financial sector governance centered on proper managerial and operational controls in banks, clear oversight responsibilities and strong risk-based supervision; and
4. Trade and investment reforms in terms of reductions in trade barriers and distortions and improvements in business climate.

Comment: The press release indicates that GDP growth of Bangladesh would be slower to 5.5% in FY12 against the government forecast of 7.0%. It doesn't seem a realistic one, rather may help the Fund to justify its program.

Wednesday, April 11, 2012

Asian Development Outlook 2012

Asian Development Bank (ADB) publishes its biannual flagship publication Asian Development Outlook (ADO) 2012 edition with a focus on confronting rising inequality in Asia.

The link of ADO 2012.

ADO 2012 includes a chapter on the Bangladesh economy focusing on the prevailing macroeconomic imbalances due to strained balance of payments coming from high commodity prices, increased oil imports for power generation and weakened exports; rising subsidy costs, mainly for fuel which are intensifying fiscal pressures and domestic borrowing and inflation in coming years.

The link of Bangladesh chapter in ADO 2012.

Summary of the Bangladesh chapter:
1.  GDP growth is projected at 6.2% in FY2012, against the government's projection of 7.0%;
2. Annual average inflation will edge up to 11.0%;
3. The external currency account is projected to move to a deficit of 0.5%;
4. Exports are projected to grow by 12.0%, mainly reflecting weak demand for garments from eurozone and US;
5. Imports are forecast to grow by 17.0%;
6. Remittances are expected to grow by 10.0%

Tuesday, April 10, 2012

IMF seminar on commodity price movements!

You may find some interesting papers on 'Policy Responses to Commodity Price Movements', a conference jointly organized by the Central Bank of Republic of Turkey (CBRT), the International Monetary Fund (IMF), and the IMF Economic Review.

Monday, April 9, 2012

Time for Sovereign Bond?

It seems that the government decided to sell sovereign bond of the amount US$500 million, for the first time of such in the history of the country, in the international stock market, even at a higher interest rate.

1. The government (in other words, balance of payment) is suffering for the acute shortage of foreign currency reserves;
2. It seems that the government is not getting the loan (US$ 1 billion) from the IMF soon as it expected earlier.

Here is the link on the news.

Comment: One common economic fact that our economists should know: interest rate is not a matter of concern when there is excess demand for money. This is a classic example.

Wednesday, April 4, 2012

Higher inflation, higher remittances: Anti-economics?

A study coordinated by Dr. Ahsan Mansur (Executive Director, Policy Research Institute) and conducted by Nurnaher Begum Rama (Joint Director, Bangladesh Bank) and Rani Sutradhar  (Assistant Director, Bangladesh Bank) found that higher inflation in Bangladesh actually helps remittance inflows into the country. As the study says, higher inflation at home relative to host country reduces the purchasing power of migrants’ family, induces migrants to send more remittances.

One can find the original working paper in the Bangladesh Bank website.

Here is the link of the news.

Comments: Though the study included both exchange rate and number of overseas jobs for Bangladeshi workers as explanatory variables, but it didn't find these variables significant in explaining remittance inflows into Bangladesh. But inflation variable was highly significant; even its t-ratio is higher than that of all other variables including GDP of 6 host countries. What do exactly these mean? What do policymakers get from this exercise of Bangladesh Bank, except wait-and-see for the increase in income in host countries and rise in domestic inflation? Anti-economics?

Monday, April 2, 2012

ADP downsized!

The Annual Development Programme (ADP) downsized by roughly 10.0% to Tk.41,000 crore, mainly due to the slow pace in using foreign fund by ministries.

Here is the news on that.