(The) effects of money supply on inflation in Bangladesh

Abstract

Inflation is an ineluctable topic in every country in the globe. It became a major concern since the beginning of 1970s when international oil price hit record high. Then controlling inflation became a priority work for most central banks especially for developing countries like Bangladesh. My thesis attempts to investigate the effects of money supply on inflation in Bangladesh during FY1976-FY2015. Here, I am following the time series approach using annual data for mentioned period by identifying the key determinants of inflation in Bangladesh under the vector error correction model (VECM). The empirical results show that both growth of broad money (M2) and value of import have long term effect on inflation in Bangladesh. The thesis reveals that policy makers should emphasize more on real output and controlled money supply to overcome the inflationary shock in both short run and long run.