Measuring inflationary pressure in Bangladesh: the P-star approach
Working paper
Title | Measuring inflationary pressure in Bangladesh: the P-star approach |
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Report Type | Working paper |
Authors | Mujeri, Mustafa K. (Author), Shahiduzzaman, Md. (Author) and Islam, Md. Ezazul (Author) |
Institution of Origin | Bangladesh Bank |
Number of Pages | 21 |
Series | Working Papers |
Year | 2009 |
Publisher | Bangladesh Bank |
Place of Publication | Dhaka, Bangladesh |
Web Address (URL) | http://www.bb.org.bd/pub/research/workingpaper/workingpaperlist.php |
Abstract | The paper estimates the P* model for the Bangladesh economy and tests its forecasting ability through generating recursive forecasts. The model puts together long run determinants of price level based on the classical quantity theory of money and short term changes in current inflation. The empirical results show that the model performs relatively well and contains additional information regarding future rates of inflation. The price and output gap models fare consistently better than the velocity gap model which brings out the importance of non‐monetary factors in explaining inflation dynamics in Bangladesh. The out of sample forecasts show that the price gap model performs better followed by the output gap model and the velocity gap model. With financial sector liberalization and reforms, it is likely that the scope for the P* model to play a more proactive role would be ramified in Bangladesh. |
Keywords | P* model; inflation; Bangladesh; inflation; Bangladesh; P* approach; forecasts; velocity gap model; price gap model; output gap model; financial sector; monetary targeting policy |
ANZSRC Field of Research 2020 | 380119. Welfare economics |
380399. Economic theory not elsewhere classified | |
380203. Economic models and forecasting | |
Public Notes | Copyright © 2009 by Bangladesh Bank. |
Byline Affiliations | Bangladesh Bank, Bangladesh |
Journal Title | The Bangladesh Development Studies |
https://research.usq.edu.au/item/9z596/measuring-inflationary-pressure-in-bangladesh-the-p-star-approach
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