The link between inflation and economic growth is one of the most important controversies in the economic literature. It is widely believed that moderate and stable inflation rates promote the development process of a country, and hence economic growth. Moderate inflation supplements return to savers, enhances investment, and therefore, accelerates economic growth of the country. This paper empirically explores the present relationship between inflation and economic growth in the context of Bangladesh. Using annual data set on real GDP and Gross Domestic Product Deflator (GDPD) for the period of 1961 to 2013, an assessment of empirical evidence has been acquired through the co-integration test, error correction models and Granger Causality test. The empirical evidence demonstrates that there exists a statistically significant long-run negative relationship between inflation and economic growth for the country as indicated by a statistically significant long-run negative relationship running from Gross Domestic Product Deflator (GDPD) to GDP. Again the empirical evidence demonstrates also that there exists a statistically significant long-run positive causality running from GDP to Gross Domestic Product Deflator (GDPD). In addition, economic growth affects inflation positively. But when increase in the rate of inflation goes beyond the threshold inflation level then inflation affects economic growth negatively. The paper discusses the important policy implications of the results.
| Published in | International Journal of Economics, Finance and Management Sciences (Volume 3, Issue 5) |
| DOI | 10.11648/j.ijefm.20150305.13 |
| Page(s) | 426-434 |
| Creative Commons |
This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited. |
| Copyright |
Copyright © The Author(s), 2015. Published by Science Publishing Group |
Inflation, Economic Growth, Bangladesh, Cointegration, Granger Causality
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APA Style
Md. Shakhaowat Hossin. (2015). The Relationship Between Inflation and Economic Growth of Bangladesh: An Empirical Analysis from 1961 to 2013. International Journal of Economics, Finance and Management Sciences, 3(5), 426-434. https://doi.org/10.11648/j.ijefm.20150305.13
ACS Style
Md. Shakhaowat Hossin. The Relationship Between Inflation and Economic Growth of Bangladesh: An Empirical Analysis from 1961 to 2013. Int. J. Econ. Finance Manag. Sci. 2015, 3(5), 426-434. doi: 10.11648/j.ijefm.20150305.13
AMA Style
Md. Shakhaowat Hossin. The Relationship Between Inflation and Economic Growth of Bangladesh: An Empirical Analysis from 1961 to 2013. Int J Econ Finance Manag Sci. 2015;3(5):426-434. doi: 10.11648/j.ijefm.20150305.13
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Download@article{10.11648/j.ijefm.20150305.13,
author = {Md. Shakhaowat Hossin},
title = {The Relationship Between Inflation and Economic Growth of Bangladesh: An Empirical Analysis from 1961 to 2013},
journal = {International Journal of Economics, Finance and Management Sciences},
volume = {3},
number = {5},
pages = {426-434},
doi = {10.11648/j.ijefm.20150305.13},
url = {https://doi.org/10.11648/j.ijefm.20150305.13},
eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20150305.13},
abstract = {The link between inflation and economic growth is one of the most important controversies in the economic literature. It is widely believed that moderate and stable inflation rates promote the development process of a country, and hence economic growth. Moderate inflation supplements return to savers, enhances investment, and therefore, accelerates economic growth of the country. This paper empirically explores the present relationship between inflation and economic growth in the context of Bangladesh. Using annual data set on real GDP and Gross Domestic Product Deflator (GDPD) for the period of 1961 to 2013, an assessment of empirical evidence has been acquired through the co-integration test, error correction models and Granger Causality test. The empirical evidence demonstrates that there exists a statistically significant long-run negative relationship between inflation and economic growth for the country as indicated by a statistically significant long-run negative relationship running from Gross Domestic Product Deflator (GDPD) to GDP. Again the empirical evidence demonstrates also that there exists a statistically significant long-run positive causality running from GDP to Gross Domestic Product Deflator (GDPD). In addition, economic growth affects inflation positively. But when increase in the rate of inflation goes beyond the threshold inflation level then inflation affects economic growth negatively. The paper discusses the important policy implications of the results.},
year = {2015}
}
TY - JOUR T1 - The Relationship Between Inflation and Economic Growth of Bangladesh: An Empirical Analysis from 1961 to 2013 AU - Md. Shakhaowat Hossin Y1 - 2015/09/08 PY - 2015 N1 - https://doi.org/10.11648/j.ijefm.20150305.13 DO - 10.11648/j.ijefm.20150305.13 T2 - International Journal of Economics, Finance and Management Sciences JF - International Journal of Economics, Finance and Management Sciences JO - International Journal of Economics, Finance and Management Sciences SP - 426 EP - 434 PB - Science Publishing Group SN - 2326-9561 UR - https://doi.org/10.11648/j.ijefm.20150305.13 AB - The link between inflation and economic growth is one of the most important controversies in the economic literature. It is widely believed that moderate and stable inflation rates promote the development process of a country, and hence economic growth. Moderate inflation supplements return to savers, enhances investment, and therefore, accelerates economic growth of the country. This paper empirically explores the present relationship between inflation and economic growth in the context of Bangladesh. Using annual data set on real GDP and Gross Domestic Product Deflator (GDPD) for the period of 1961 to 2013, an assessment of empirical evidence has been acquired through the co-integration test, error correction models and Granger Causality test. The empirical evidence demonstrates that there exists a statistically significant long-run negative relationship between inflation and economic growth for the country as indicated by a statistically significant long-run negative relationship running from Gross Domestic Product Deflator (GDPD) to GDP. Again the empirical evidence demonstrates also that there exists a statistically significant long-run positive causality running from GDP to Gross Domestic Product Deflator (GDPD). In addition, economic growth affects inflation positively. But when increase in the rate of inflation goes beyond the threshold inflation level then inflation affects economic growth negatively. The paper discusses the important policy implications of the results. VL - 3 IS - 5 ER -
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