Monetary Policy Efficacy for Price Stability: An In-depth Analysis of Bangladesh’s Economic Landscape

Dr. Masud Rana; Dr. Md. Abdullah Al Mamun; Dr. Md. Kamal Hossain; Rebeka Sultana Rekha

Authors

Dr. Masud Rana Pabna University of Science and Technology, Bangladesh
Dr. Md. Abdullah Al Mamun Pabna University of Science and Technology, Bangladesh
Dr. Md. Kamal Hossain Pabna University of Science and Technology, Bangladesh
Rebeka Sultana Rekha Pabna University of Science and Technology, Bangladesh

Keywords:

Effectiveness, Monetary Policy, Price Stability, Bangladesh

Abstract

Purpose of the study: This study aims is to examine the effectiveness of monetary policy on price stability in Bangladesh.

Methodology: The researcher has collected secondary data from the audited annual reports of the Bangladesh bank from 2014 to 2022. The inflation rate selected as the dependent variable, and the exchange rate, real interest rate, cash reserve ratio, and repo rate selected as the independent variables. The study used regression analysis to find out the relationship between dependent and independent variables, which is supported by the results of normality tests, multicollinearity tests, and autocorrelation tests.

Findings: The study found that there was a statistically significant relationship between the dependent variable inflation rate and the independent variables cash reserve ratio and repo rate. On the other hand, there was no significant relationship between the dependent variable's inflation rate and the independent variables' exchange rate and real interest rate. The relationship between the inflation rate and the exchange rate was almost significant. Therefore, the study found that monetary policy has a significant impact on price stability in Bangladesh.

Implications: The finding of the present study has been found to have implications for policy makers, regulators, professional, practitioners, researchers, economists etc. in the money market of Bangladesh.

Limitations and Future direction: This study has covered the operating of monetary policy for 9 years from 2014 to 2022 though I could consider since 1971. In addition, the study has considered only Bangladesh Bank and listed conventional private commercial banks. The study has not addressed application of monetary policy in NBFIs and capital market.

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Monetary Policy Efficacy for Price Stability: An In-depth Analysis of Bangladesh’s Economic Landscape

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