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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, January 21, 2013

Innovative policy by BB?

Bangladesh Bank bought about $648 million from commercial banks during 1 December 2012 to 16 January 2013 with the central bank's 30-day bills and Islamic bonds, instead of paying in cash. Paying in cash basically increases the cash liquidity position of banks, which may fuel inflation up, which is the logic of the central bank behind taking such decision. Definitely, this is an innovative policy!

Now, what is the other side of the coin? Extracting foreign currency from the market means that there will be a shortage of foreign currency, which may depreciate Taka against foreign currencies. If this works, then inflation will increase. (Obviously, Taka depreciation has positive impact on export and remittance earnings) Again, there was an opportunity that excess foreign currency in the market could appreciate Taka, which could help decline in inflation; so in a way, this innovative policy loses this opportunity.

BB should be more prudent while giving explanation for its policy choice. Based on the aforesaid stance, it seems that BB is more worried about exchange rate stabilization; it wants to continue to have a managed floating exchange rate regime without taking any risk for inflation prospects - which is not problem. Controlling inflation is a secondary goal in this particular case.

Report on the issue!       

Sunday, January 20, 2013

Reduced growth forecast by WB

The World Bank released its new 'Global Economic Prospects' report, where it is mentioned that the Bangladesh economy will grow at 5.8% in FY2013, while considering all the latest information. Just for your information, the GDP growth in FY2012 was 6.3%.

The link of the report.
News on the report.

Wednesday, January 9, 2013

IRBD 2013, CPD

Centre for Policy Dialogue (CPD) publishes its analytical review of Bangladesh's macroeconomic performance in FY2013 under its IRBD programme. Along with overall macroeconomic assessment, it provides stories on the impact of recent petroleum price increase, performance of manufacturing sector in Bangladesh, and state of governance in the banking sector.

Link of the report! 

Impact of oil price increase on agri production

Dr Abul Basher writes in the Financial Express on the impact of recent petroleum price increase on the agriculture production, applying both theoretical and empirical arguments. A noteworthy reading!

Link of the article.

Tuesday, January 1, 2013

Record amount of Remittance inflows!

The first day the new year brings wonderful new for the economy. Non-resident Bangladeshis sent an record amount of $14.2 billion in 2012. Sharp increase in manpower exports in 2010 and 2011 and rapid depreciation of Taka against US$ since early 2012 were the basic reasons of this success. Obviously, people were encouraged to send money through former bank channel, thanks to the efforts made by Bangladesh Bank and all commercial banks.

Report on the news.