STRATEGIC DETERMINANTS AND STABILITY OF REAL EXCHANGE RATE IN BANGLADESH: 1976-2017.

Author:Zayed, Nurul Mohammad
 
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INTRODUCTION

In economics, an exchange rate is the rate at which one notes will be substituted for another. It is furthermore observed as the worth of one nation's currency in next of kin to another currency. The real exchange rate is a rate which dealings how loads of times an item of goods gaining locally; can be purchased from out of the country. It specified the ratio of objects are purchased in the domestic market with the items are purchased in the foreign market. The objective of this study is to analyze the influence of real exchange rate changes on relative price, Inflation rate, GDP growth rate, Interest Rate and Real GDP or Income level in Bangladesh during 1976-2018 by applying the Johansen Long run Co integration technique.

LITERATURE REVIEW

Chowdhury et al. (2014) studied a discrepancy in the empirical calculations of the exchange rate regime alternative. The piece defines a set of variables that helped to clarify the preference of exchange rate in Bangladesh for the period 1990-2011 with employing a time series analysis that elucidates interest rate; GDP growth rate; inflation rate and current account balance have affirmative relation with exchange rate. Hossain & Ahmed (2009) studied that explores exchange rate policies of Bangladesh under a floating rate regime in a widespread mode. The real exchange rate and the nominal exchange rate both ware considering in this examination with a recommendation that real exchange rate of euro should be alleviated. Hassan et al. (2016) stumble on convincing proof of the loss of aggressiveness of exports due to the real effective exchange rate admiration has been recognized in Bangladesh. Nevertheless, remaining nominal exchange rates runs and approval of the Real Effective Exchange Rate (REER) for the declared era pointed out that Bangladesh looks upper inflation than its trading colleague countries. Uddin et al. (2013) stated that an exchange rate activity considerably depends upon the macro rudiments of the particular countries. This study also indicates that the nominal exchange rate is influenced by the rise in the relative debt is another important source. Upholding medium-to-long time flexibility and short-term constancy should be the common purpose of exchange rate determination strategies in Bangladesh. Islam & Hossain (2014) examines the connection between the exchange rate, GDP growth rate and exports in Bangladesh for the period 1981 to 2013 with the conclusion of the positive relationship. They suggested the strategy makers should also prolong to get on prolific behaviors that will boost Bangladesh's exports more than imports. Akther et al. (2013) considered that demand alarms particularly created from exterior area are accountable for pointed depreciation of BDT exchange rate throughout the two periods. As per econometric scrutiny supply shocks are also significant for exchange rate variation. Williams et al. (2016) reveals that...

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