Bangladesh Bank Training Academy Journal

Abstract: The study empirically examines the impact of investment on the per capita income growth in Bangladesh within the period of 1980 to 2018. The paper also tries to explore the causal effects of total debt to investment and per capita income and inflation to per capita income in Bangladesh. This research uses Joahansen Juselius co integration method to establish the long run relationship among the variables. The study also employs Toda-Yamamoto augmented Granger causality test to find the direction of causality among the variables. The results of Joahansen Juselius co integration test confirm long run relationship among capita income, investment, total debt and inflation.According to the causality test results, there exist no causal effects from investment and inflation to per capita income growth in Bangladesh. Moreover, the results also revealed that the escalating total debt has no positive impact on investment and per capita income in Bangladesh. The study, therefore, recommends some plicy reforms particularly on the ground to accelerate investment specifically on the productive sector and to pay high concentration on the efficient debt management.

Citation: Chowdhury, M., & Hossain, S. M. (2018). Testing investment led income growth in Bangladesh: An empirical investigation. Thoughts on Banking and Finance, 7(2), 10–25.

Abstract: This paper investigates comparative advantage and the export potential for the major competing countries i.e. India, Sri Lanka, Vietnam, Pakistan, China, Cambodia and Turkey along with export potential sectors and products of Bangladesh. The Revealed Comparative Advantage analyzes the extent of comparative advantage between Bangladesh and its major competitors. The Export Potential Assessment identifies the export potential from Bangladesh to the world market. Apparel sector has the highest export potential sector in value terms. Currently, Bangladesh economy has focused on the large apparel sector that accounts for 80-90 percent of its export baskets. Most of the sectors and product potentials have already been utilized, especially in the EU–West Europe (Bangladesh’s export share 56 percent) and the USA (Bangladesh’s export share 17 percent) markets. The findings are expected to contribute to extract untapped export potential that may help to take next step by increasing the export voume to the respective potential markets as well as products.

Citation: Kabir, R., Ali, A., & Uddin, S. (2018). Comparative advantage and export potential for Bangladesh in the world, the EU-West Europe, and the USA markets: An empirical analysis. Thoughts on Banking and Finance, 7(2), 26–50.

Abstract: Macroprudential policies for achieving financial stability gained global attention of the government policy makers and economists after the global financial crisis (GFC). There are challenges in applying macroprudential policies because it is difficult to identify financial system‟s vulnerability early enough and also its effectiveness depends on financial structure, developments in the financial market as well as political and economic scenario of a country. Bangladesh Bank (BB), as central bank and monetary authority of the country, uses micro as well as macroprudential tools as complementary to monetary and exchange rate policies such as prudential regulations for consumer finance and small enterprise financing, provision against loans and advances, time varying capital requirement and risk weights against various assets, open position limit etc. There appears to be a lack of dynamism in adopting key macroprudential tools to counter procyclical behavior of the banking sector, while ack of effective coordination between monetary policy measures and macroprudential tools was also observed. Macroprudential regulations of BB partially contributed to check overexposure of the banking sector to capital market at the cost of a sudden crash at the end of 2010, but failed to rein in excessive credit growth during 2010-12 and consumer credit growth during 2015-17. A reduction in provision for standard SME credit in 2012, supported growth in SME credit disbursement contributing to diversifying risks in the banking sector. Some relaxations in prudential norms for residential housing loans have positive impact on growing home loan.

Citation: Nayn, M. Z., & Siddiqui, M. S. (2018). Effectiveness of macroprudential policy in Bangladesh. Thoughts on Banking and Finance, 7(2), 51–84.

Abstract: Efficiency is one the major concerns in any business setting irrespective of the nature or type of industry which it belongs. So, any company wants to achieve greater outputs with lower inputs, or to use the available inputs to the maximum. In this paper, the use of Data Envelopment Analysis (DEA) technique is illustrated in measuring the operational efficiency of the banking sector in Bangladesh, which currently has 58 scheduled banks. Out of these, 38 private commercial banks are taken into this analysis, where state owned banks and foreign commercial banks have not been considered. Five-year panel data (2013 to 2017), collected from the secondary sources, have been used to model the efficiency of different banks. DEA has provided several efficiency measures such as technical, allocative, cost, technical and scale efficiency that explain efficiency differentials of different banks in Bangladesh. The DEA results show that Islamic banks are slightly more efficient than conventional bans. While, among the conventional banks, public conventional banks are the least efficient. The returns to scale estimation show that both conventional and Islamic banks in Bangladesh have still scope of improvement in scale efficiency. Second stage regression results also indicate that Return on Asset (ROA) have significant contribution on efficiency level of the private commercial banks. It is also revealed that first-generation banks are efficient over second, third and fourth generation banks; while second generation banks are better than third and fourth generation banks.

Citation: Rahman, M. M., & Sohel, M. N. I. (2018). Efficiency estimation of private commercial banks in Bangladesh: Application of DEA approach using panel data. Thoughts on Banking and Finance, 7(2), 85–116.

Abstract: The main objective of this study is to examine the empirical cointegration, long and short run dynamics and causal relationships between financial development and economic growth in Bangladesh over the period 1973 to 2015. Employing three different indicators for financial development in the growth form, namely: the ratio of broad money (M2) to GDP, the ratio of total deposit liabilities to GDP, and the ratio of total trade (export plus import) to GDP, the ARDL bounds tests as well as additional cross-checking test convincingly confirmed long run cointegration between economic growth and financial development indicators in Bangladesh. The estimated long run and short run results indicate that, growth in the total trade ratio has insignificant impact on economic growth. However, growth in broad money to GDP ratio and growth in total deposit liabilities to GDP ratio appeared to have time variant impact on economic growth: the former having significant positive impact in the short run butnegative in the long run, while the latter has significant negative impact in the short run but positive in the long run on economic growth. On the whole, Granger causality analysis indicated a bidirectional, co-evolutionary process between financial development and economic growth in the context of Bangladesh.

Citation: Siddiqui, K. S., Kashem, M. A., Hasin, Z., & Azam, F. M. Z. (2018). Financial development and economic growth in Bangladesh: Empirical evidence from ARDL cointegration and Granger causality analysis. Thoughts on Banking and Finance, 7(2), 117–147.

Abstract: This study examines the contributions of bank loans to Small and Medium Scale Enterprises (SMEs) in employment generation in Bangladesh. This is because the sector serves as a catalyst for employment generation, poverty reduction and economic development as well. The aim of this study therefore; is to find out the relationshipbetween employment and SME Financing. Using panel data analysis with a sample of 310 enterprises for the period 2009-2011, the paper shows that SME loans has a positive impact on employment generation.

Citation: Masuduzzaman, M., Praveen, F., Ara, S., & Akther, M. (2018). The role of small and medium enterprises (SMEs) loans on employment generation: Bangladesh perspective. Thoughts on Banking and Finance, 7(2), 148–161.

Abstract: This study has tried to examine the exchange rate performance on the reserve accumulation of Bangladesh in the floating regime. Using quarterly time series data (2003-2018), this paper has attempted to explore the influence of exchange rate on foreign exchange reserves by employing standard econometric techniques in Bangladesh economy. The findings of the empirical analyses reveal that the foreign exchange reserves have no statistically significant response to the exchange rate movements, but the expected positive sign in the coefficient of exchange rate gives some useful insight like that there may be an economic implication. On the other hand, lag inflation has a significant negative interface on reserve growth and foreign direct investment inflow growth has a significant positive influence on reserve growth. The effect of the rest of the other variables on reserve growth is not statistically well justified. In the end, it may be concluded that although the nominal exchange rate chans and reserve growth relationship is not empirically established; however, from the economic point of view, the floating exchange rate regime has an important implication on the macroeconomic behavior of Bangladesh economy.

Citation: Islam, M. M. (2018). Exchange rate movement and international reserve position in the floating exchange rate regime of Bangladesh. Thoughts on Banking and Finance, 7(2), 162–173.

Abstract: Digital payment systems play a crucial role in developing an efficient payment system in both developed and developing countries. Given the benefits of digital payments, Bangladesh Bank has upgraded and digitized its payment and settlement system remarkably over the past few years. The paper discusses on present digital payment system in Bangladesh, its advantages, disadvantages and limitations. Policy Recommendations to digitize domestic payment system are: developing a unique identification program in a centralized database that both public and private sector players can access to verify identities, implementing strict monitoring systems to prevent illegal money transaction, establishing an appropriate consumer protection framework, promoting product understanding and consumer education, improving regulatory environment, implementing interoperability among the platforms, Promoting merchant acceptance infrastructure, leveraging existing networks quickly to far-reaching areas, digitizig all government receipts & payments and merchant payments, and adopting appropriate cyber security measures.

Citation: Akhtaruzzaman, M., Younus, S., Islam, S., & Karim, M. A. (2018). Developing a digital payment systems in Bangladesh. Thoughts on Banking and Finance, 7(2), 174–200.