Bangladesh Bank Training Academy Journal

Abstract: This paper investigates the impacts of inflation, trade openness and exchange rate on foreign direct investment (FDI) in Bangladesh, Colombia, India, Indonesia, Mexico, Philippines, and Turkey. Johansen-Juselius (1988) procedure is applied to test the cointegration relationship among the variables followed by the Vector Error Correctionmodel. The empirical results trace a long-run equilibrium relationship in the variables. Among the three independent variables, inflation and exchange rate are found as important factors in explaining the changes in FDI inflows in both short-run and long-run.Therefore, the challenge before the central banks of these emerging countries including Bangladesh is to maintain a stable exchange rate that will boost domesticproduction, increase FDI and maintain internal and external balance. In order to protectexternal competitiveness, one of the possible ways is to intervene in the domestic foreignexchange market by the concerned central banks. As trade opennes is a means of the market-related economic determinant regarding attracting FDI inflow in the host country, so trade policy vis-a-vis monetary and fiscal policies should be made proactiveconsidering the global perspectives.

Citation: Younus, S., & Prince, E. R. (2017). An analysis of the impacts of inflation, trade openness and exchange rate on foreign direct investment in Bangladesh and some selected emerging countries. Thoughts on Banking and Finance, 6(1), 9–45.

Abstract: This paper examines the turning points of business cycle in Bangladesh using a Markov regime-switching approach to annual GDP of Bangladesh spanning 1974-2013. In particular, it applies the univariate Markov-switching model proposed by Hamilton (1989) which models GDP series with stochastic trend and a stationary cyclical component in order to identify turning points in business cycles observed in Bangladesh. Estimation shows that real GDP growth in Bangladesh follows a second order autoregressive process, AR(2) where mean GDP growth switches between high growth and low growth regimes. In addition, switching time coincides with the year 1991 when the financial sector reform program (FSRP) started after privatization and trade liberalization in the previous decade. The study also finds that both high and low growth regimes are significant and persistent implying that the high growth regime that began in 1991 is likely to continue in the subsequent years given the data generating process Identification of turning points in business cycles may be useful to economic agents and policymakers in decision making process.

Citation: Alam, M. M., Chowdhury, R., Khatun, R., & Roy, R. (2017). A Markov-switching model of GDP growth in Bangladesh. Thoughts on Banking and Finance, 6(1), 46–56.

Abstract: This paper aims at examining the validity of purchasing power parity (PPP) both in absolute and relative terms with reference to the long run behavior of the real exchange rate of Bangladesh Taka relative to USA dollar. In doing so, the paper tests the presence of mean-reversion in the real exchange rate by using the unit root test approach i.e. ugmented Dickey-Fuller, DF-GLS, Zivot-Andrews tests. The paper verifies the long run relationship on co-integration and VAR framework. Using monthly data (01/2007-06/2013) and annual data (1986-2014), the paper finds support for both absolute and relative PPP, with an evidence of structural change (Quandt -Andrew test and CUSUM test) for only monthly data. VECM has been applied on monthly data, as there exists co-integrating equations for only monthly data (by using Johansen test). Unit root test indicates that the real exchange rate, that is the I (1) is not stationary.

Citation: Kamal, J. B. (2017). Purchasing power parity (PPP) with structural break and mean reversion in real exchange rate: The case of Bangladesh Taka and Dollar. Thoughts on Banking and Finance, 6(1), 57–78.

Abstract: Bank deposit, as a proxy of saving, is usually influenced by disposable income (Y). Besides disposable income, interest rate and other economic and noneconomic factors can play an imperative role on deposit movement. However, the nature of deposit mobilization may change in different regions due to political, social and cultural variation. This study examines the determinants of banks' time deposit especially for Bangladesh economy using autoregressive distributed lag (ARDL) model with cointegration techniques and error correction term. The results indicate that the growth of banks' time deposit in Bangladesh is positively influenced by the changes of per capita income, level of financial deepening (measured by domestic credit/gross domestic product) and remittance inflow in long run and if the long run relation is deviated somehow, it will take about 2.18 years to converge to the original integration.

Citation: Islam, M. S. U., Sarker, M. B., Mawla, I.-I., Jahan, I., Roy, D., & Ullah, M. A. (2017). Determinants of bank deposit in Bangladesh: An ARDL cointegration approach. Thoughts on Banking and Finance, 6(1), 79–91.

Abstract: This paper examines the efficacy of the monetary transmission channels in Bangladesh using a five variable unrestricted vector auto-regression (VAR) technique for the sample period from June 2003 to June 2015. Several monetary transmission channels, i.e., interest rate channel, bank lending channel or credit channel, and the exchange rate channel, have been analyzed to investigate the efficacy of policy reforms undertaken in the arena of monetary and exchange rates since 2002. Results from estimated VAR show that money supply (M2) have significant impacts on output (GDP) and the price level (Inflation) in Bangladesh implying that the monetary policy transmission channels are effective in influencing real variables through banks portfolio. Although all the monetary transmission channels work in Bangladesh, the bank lending channel has relatively more impact than that of interest rate or exchange rate channel in Bangladesh. Conversely, this study finds that the policy rate responds to inlation implying that the transmission channels work from inflation to policy rate as the central bank responds to higher inflation by raising policy rate in Bangladesh.

Citation: Rahman, M. A., & Younus, S. (2017). Examining the efficacy of the monetary transmission mechanism channels of Bangladesh: A vector autoregression approach. Thoughts on Banking and Finance, 6(1), 92–118.

Abstract: This paper specifically focuses on the performance measures, and their determinants of the banks operating in Bangladesh. By using bank specific panel data over the period 2005-2014, the paper estimates the impacts of bank specific and macroeconomic factors on bank profitability, represented by return on equity (ROE). We find that non-performing loans (NPL), foreign loans (FL) and capital adequacy ratio (CAR) have statistically significant negative impact on bank profitability while non-traditional activities (NTA)2have significant positive impact on bank profitability with a very high magnitude.

Citation: Khatun, R., Roy, R., Chowdhury, R., & Hussain, M. I. (2017). Determinants of bank profitability in Bangladesh. Thoughts on Banking and Finance, 6(1), 119–130.

Abstract: This paper examines the significant role of investment in the economic growth process of Bangladesh. The study revisits empirically the impact of investment on economic growth. The study applies Ordinary Least Square (OLS) Method for using data from FY1983 to FY2017 period to investigate the responsiveness of investment to GDP growth. The key finding of the study depicts that there is a positive relationship between investment and economic growth in Bangladesh. The results enable us to estimate the desired level of investment to achieve a target for GDP growth. It also reveals that there is a gap of investment to achieve a targeted level of growth in Bangladesh and suggests to increase investment gradually to the desired level.

Citation: Masuduzzaman, M., & Biswas, B. P. (2017). Does investment stimulate Bangladesh? An empirical analysis. Thoughts on Banking and Finance, 6(1), 131–151.

Abstract: The word job satisfaction refers to an individual's common attitude toward his or her job. The study has been attempted to understand and explain the job satisfaction, which is influenced by utilitarian reasons (e.g., future progression, job motivation, salary structure, job security, responsibility, working environment etc.). Only 100 employees have randomly selected for this study from the state - owned commercial banks of Bangladesh. The data collected through an interview with a specific questionnaire. The collected data were analyzed using descriptive statistics, correlation, and regression analysis. The results indicate a weak positive correlation between variables. The overall result of the study shows that the employees of SOCBs are significantly satisfied.

Citation: Chowdhury, H. J., & Begum, A. (2017). Employee job satisfaction of commercial banks in Bangladesh: An empirical study. Thoughts on Banking and Finance, 6(1), 152–175.