A good read to understand Bangladesh's macroeconomy
Skip to main content
  • Home
  • Economy
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
  • Epaper
  • More
    • Subscribe
    • COVID-19
    • Bangladesh
    • Splash
    • Videos
    • Games
    • Long Read
    • Infograph
    • Interviews
    • Offbeat
    • Thoughts
    • Podcast
    • Quiz
    • Tech
    • Archive
    • Trial By Trivia
    • Magazine
    • Supplement
  • বাংলা
The Business Standard

Thursday
August 11, 2022

Sign In
Subscribe
  • Home
  • Economy
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
  • Epaper
  • More
    • Subscribe
    • COVID-19
    • Bangladesh
    • Splash
    • Videos
    • Games
    • Long Read
    • Infograph
    • Interviews
    • Offbeat
    • Thoughts
    • Podcast
    • Quiz
    • Tech
    • Archive
    • Trial By Trivia
    • Magazine
    • Supplement
  • বাংলা
THURSDAY, AUGUST 11, 2022
A good read to understand Bangladesh's macroeconomy

Book Review

Abdul Bayes
04 September, 2020, 11:50 am
Last modified: 04 September, 2020, 12:04 pm

Related News

  • Fuel price hike could have been avoided with BPC savings: CPD 
  • Tea garden workers' demo for pay hike continues
  • Japan, UNDP launch project to address healthcare waste management in Bangladesh, Bhutan and Maldives
  • Dhaka got $5.83b as Covid recovery support in 3 years
  • Muslims observe holy Ashura in Bangladesh

A good read to understand Bangladesh's macroeconomy

A total of seventeen chapters (articles) written by a bunch of brilliant economists of Bangladesh are presented in the compilation

Abdul Bayes
04 September, 2020, 11:50 am
Last modified: 04 September, 2020, 12:04 pm

The adage goes that a book should be known by its content, and not by the cover it carries. A very recent book published by Palgrave Macmillan (2020), however, appears to satisfy both conditions - crisp cover and contemporary content.

Generally speaking, economics textbooks are in avalanche in the market but of Bangladesh's macroeconomics in particular, the supply is almost non-existent.

In this backdrop, Dr Monzur Hossain, a senior research fellow of the Bangladesh Institute of Development Studies (BIDS) seemingly attempted to make a dent to the drought. Recently, he edited a seminal book titled, "Bangladesh's Macroeconomic Policy: Trends, Determinants and Impact".

The 500-page hugely book braces four parts as follows:  (1) Macroeconomic Growth Policy, Growth and Poverty; (2) Monetary and Fiscal Policy; (3) International Trade and Finance and (4) Finance and Growth.

A total of seventeen chapters (articles) written by a bunch of brilliant economists of Bangladesh are presented in the compilation. Monzur appears in fourteen of them either as principal or as co-author and his plenteous penning helped the book see light of the world. 

Notably, each article in the book represents an eloquent exposition of evidence-based macroeconomic issues but, due to space limit, we shall pick up a few.

The first part of the book portrays an overview of Macroeconomic Policy, Growth and Poverty Reduction in Bangladesh. Once bracketed as a 'Bottomless Basket' in the 1970s, Bangladesh is now being dubbed as a 'Development Puzzle' in international discourse. Economic growth rate averaged 6 percent or so during the last decade and crossed 7 percent in recent few years till corona crumbled the world. 

The introductory chapter therein focuses on macroeconomic performance, challenges of growth and future growth potential. It argues that macroeconomic policies are important for poverty reduction. There is a clarion call for a judicious mix of monetary and fiscal policies, integrated financing strategy, and institutional reforms with a view to stepping into a high growth trajectory.

Both rewards and risks are examined in this chapter on an empirical plane. That macroeconomic stability matters for the poor is amply argued in the following lines: "…instability might cause 'hysteresis' - a phenomenon where low output growth might have a lingering negative impact on poverty through shocks to the human capital of the poor."

An analysis of the pattern, nature and consequences of inflation and its interface are presented in the following chapters (chapters 2 and 3). Rather than grasping the gravity of the impact of inflation at aggregate level, the authors had a look at impacts across economic classes. "In the backdrop of rising inflation, it is important for policy makers to know which types of households are more affected by rising inflation and what measures can be adopted to redress their disadvantages, at least partially". 

For example, the pattern of rice expenditure and rice prices tend to show that a sharp rise in rice prices (of  food in general), could wreak havoc among lower income classes - especially those on the fringe of poverty line and those unable to adjust wages to prices.

Impact of energy price adjustments are done through a Macro-Econometric Modelling to reason that a partial analysis may not be appropriate to gauge the proper impact of energy prices on various economic indicators. Any upward revision in energy prices is inflationary to some extent to lower real GDP growth rate and vice versa, ceteris paribus. 

However, changes in other macroeconomic indicators, pari passu adjustments, could improve the outcome (Chapter 4).

The 'impotency' of monetary policy is well-articulated in the book. Monetary transmission channels in Bangladesh are thought to be weak and, ipso facto, monetary policy is less effective in achieving its dual objective of growth and price stability.

In the context of Bangladesh, the choice of target variables is the major constraint - administered interest rates and directed credit allocation make it difficult to use as target variables. "The weak link between money supply and interest rate reveals the fact that the financial system of Bangladesh is not largely competitive and efficient."

By and large, monetary policy has been less effective in accelerating growth and money supply has no discernible impact on inflation because of predominance of food inflation (Chapter 5).

Silver lining looms large on fiscal front. Maintenance of fiscal discipline has been commendable. The fiscal stance remained relatively robust despite exogeneous and endogenous shocks and the fiscal stance seems sustainable at the current and projected levels of the fiscal deficit. 

Public investment in health and education is a propeller of growth. On the other hand, a production function approach has been adopted to look into the effectiveness of fiscal policy instrument on economic growth. "The findings suggest that fiscal policy is more effective in stimulating growth in the long run than in the short run thus indicating to the importance of increasing government consumption for stimulating economic growth in Bangladesh."

Moreover, efficiency of the government spending must be ensured to obtain desired impact on economic development" (Chapters 6 and 7).

The remaining chapters relate to important issues like Financing Infrastructure Investment, Trade Liberalisation and Trade Performance, Analysis of Trade Pattern, Exchange Rate Management, Capital Flows, Aid and Economic Development, Macroeconomic Determinants of Remittance, Financial Liberalisation, Microfinance and Development of Capital Market. 

Each of them, penned by famous economists, highlights patterns, problems, prospects and policy prescriptions pertaining to Bangladesh's macro-economy.

The role of Aid in Macroeconomic Stability and Economic Development (Chapter 13) has been assessed in terms of the resultant improvement in economic, social and dependency on aid. The authors noticed that, inter alia, "public investments with support from foreign aid did not crowd out private investments. Rather, aid has played a catalytic role in public investment in infrastructure development that has led to private-sector-oriented growth".

Aid played a positive role in attaining fiscal stability, build-up of foreign exchange, improvement in key social indicators and more importantly, aid has reduced dependency on aid. But aid, argue the authors, should continue to pour in on the heels of financing infrastructure, protection against vulnerabilities in external sector, and to counteract climate change impact. 

However, the 'before-after' comparison could become a major concern to the critiques.

We reckon that the book would be a very rewarding read not only for researchers but also for whom apparently the book tolls - policy makers. An abridged version of the book containing the policy prescriptions in a paperback could possibly be a good cake for policymakers to swallow the valuable insights ingrained in the book.


The reviewer is a former Professor of Economics and Vice Chancellor of Jahangirnagar University and now an Adjunct Faculty, East West University.

Features / Top News

Bangladesh / Macroeconomy

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • Fuel price hike could have been avoided with BPC savings: CPD
    Fuel price hike could have been avoided with BPC savings: CPD
  • Can’t afford any more losses: BPC chairman
    Can’t afford any more losses: BPC chairman
  • A worker holds a nozzle to pump petrol into a vehicle at a fuel station in Mumbai, India, May 21, 2018. REUTERS/Francis Mascarenhas/File Photo
    Short measure at petrol pumps due to low commissions: Owners' association

MOST VIEWED

  • Photo: Collected
    Sapiens – A Graphic History 
  • Photo: Collected
    The Collaborator: A tale of working a warzone
  • The economy of Bangladesh: Not yet out of the woods
    The economy of Bangladesh: Not yet out of the woods
  • Illustration: TBS
    The Pearl Necklace: A lyrical journey of sensitivity and contemplation
  • Dune covers. Photo: Collected
    DUNE: An epic on par with Tolkein
  • Illustration: Collected
    Inherited Memories: Third Generation Perspectives on Partition in the East

Related News

  • Fuel price hike could have been avoided with BPC savings: CPD 
  • Tea garden workers' demo for pay hike continues
  • Japan, UNDP launch project to address healthcare waste management in Bangladesh, Bhutan and Maldives
  • Dhaka got $5.83b as Covid recovery support in 3 years
  • Muslims observe holy Ashura in Bangladesh

Features

The elevated ground is made out of soil on which grass and trees have grown. This grass-covered elevated ground extends to the perimeter of the establishment. Photo: Maruf Raihan

Aman Mosque: Where form and function complement each other

1d | Habitat
Photo: BSS

Begum Fazilatunnessa Mujib . . . woman of moral power

2d | Thoughts
Will Glass Cosmetics be your next skincare holy grail?

Will Glass Cosmetics be your next skincare holy grail?

2d | Brands
Akij Tableware: More than just dishes on a table

Akij Tableware: More than just dishes on a table

2d | Brands

More Videos from TBS

Salimullah Khan on Ahmad Safa's thinking on nature

Salimullah Khan on Ahmad Safa's thinking on nature

3h | Videos
Will Tata turn around the Indian car market?

Will Tata turn around the Indian car market?

3h | Videos
Those who remain in morgue for years after death

Those who remain in morgue for years after death

5h | Videos
Is Donald Trump getting caught in tax evasion case?

Is Donald Trump getting caught in tax evasion case?

5h | Videos

Most Read

1
Dollar crisis: BB orders removal of 6 banks’ treasury chiefs 
Banking

Dollar crisis: BB orders removal of 6 banks’ treasury chiefs 

2
Diesel price hiked by Tk34 per litre, Octane by Tk46
Energy

Diesel price hiked by Tk34 per litre, Octane by Tk46

3
Housing projects sprouting up by Dhaka-Mawa expressway
Real Estate

Housing projects sprouting up by Dhaka-Mawa expressway

4
Infographic: TBS
Banking

Dollar rate will be left to market after two months: Governor

5
Photo: Collected
Transport

Will Tokyo’s traffic model solve Dhaka’s gridlocks?

6
Bangladesh to resume talks for Ukrainian wheat import
Economy

Bangladesh to resume talks for Ukrainian wheat import

EMAIL US
[email protected]
FOLLOW US
WHATSAPP
+880 1847416158
The Business Standard
  • About Us
  • Contact us
  • Sitemap
  • Privacy Policy
  • Comment Policy
Copyright © 2022
The Business Standard All rights reserved
Technical Partner: RSI Lab

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - [email protected]

For advertisement- [email protected]