Bangladesh Bank Training Academy Journal

Abstract: In recent years, the effect of financial development on economic growth has been paying attention by policy makers and researchers all over the world due to the development and expansion of financial institution and market. A sound and the robust financial system can accumulate capital from various sources and allocate the capital resources to most productive sector effectively. This study examines the pivotal relationship between the financial development and economic growth in Bangladesh using the autoregressive distributed lag (ARDL) approach over the period from 1977 to 2015. Empirical analysis observe the effect of financial development and economic growth through some regression models, concludes that the financial indicators namely domestic credit to private sector by banks (CPS) to gross domestic product (GDP), money supply (M2) to GDP, and stock market capitalization (MC) to GDP has a statistically significant positive effect on GDP per capita. Among these three financial deveopment indicators, money supply has relatively higher and stock market capitalization has a lower significant effect on GDP. ARDL model used to determine the short-run and the long-run relationship among the variables. Bounds test conferred the cointegration or long run relationship between study variables and the long-run co-efficient of domestic credit to private sector by the bank is seemed have statistically positive significant contribution but the long run coefficient of money supply is appeared to be statistically insignificant. In short run,there is a causality running from financial development (domestic credit to private sector by depository banks (CPS) as a percentage of GDP, broad money (M2) as a percentageof GDP, stock market capitalization (MC) as a percentage of GDP) to economic growth.

Citation: Afroz, N., Hasan, M. T., & Rokonuzzaman, M. (2021). The relationship between financial development and economic growth in Bangladesh: An ARDL approach. Thoughts on Banking and Finance, 8(1), 9–26.

Abstract: The objective of the paper is to analyze the external sector performance in Bangladesh, especially export earnings and inflow of remittances. The main findings of this paper reveal that export earnings and remittances are the dominating external sector factors of Bangladesh economy for decades although, both remittance and migration growth decreased lately. Remittance inflows from different destination have also changed over the period. On the other hand, migration from Bangladesh is concentrated in a few destinations which may generate serious problem if any external shock creates from those destinations. However, the decreasing rate of remittance and outward migration might create severe problem in the economy by reducing employment opportunities and output level. Conversely, export growth has underperformed over the few years.Commodity exports show that Bangladesh is predominantly a manufactured goods exporting country and Bangladesh's export basket is concentrated in a few commodites. In addition, export earnings from Bangladesh are centered in a few destinations. Any fluctuations of the export demand from these regions might seriously affect the external balance of the country as well as expected level of growth. The decreasing rate of remittance and export earnings is a concern for the overall economy as well as for the policy-makers regarding the external sector.

Citation: Begum, M. N., & Rahman, M. M. (2021). Trends, structure and performance of exports and remittance in Bangladesh: An empirical analysis. Thoughts on Banking and Finance, 8(1), 27–44.

Abstract: The last two decades (the 90s and 00s) are considered as lost decade in Japan due to the persistent stagnancy in the economic activities. This sluggishness in economic activities proliferated when the global economic crisis hit in 2008. The current Abe government, therefore, introduces 'three arrows' policies to stimulate the economy from this stagnant situation when they came to the power. For this reason, Japanese yen depreciates a lot in recent years to support the government policies. Hence, this paper aims to evaluate the impact of yen devaluation on the BOP movements during the period 1998 to 2016 using OLS and VAR model. The estimated results reveal that exchange rate is not the main factor in determining the BOP movements in Japan. Japan is an industrialist country, so many economic factors from both inside and outside of the country are vital to determine the BOP rather than just the exchange rate.

Citation: Sarker, M. N. A., Hoque, M. R., Rahaman, A., & Hasan, M. S. (2021). An analysis of relationship between exchange rate and balance of payment for the Japanese economy. Thoughts on Banking and Finance, 8(1), 45–58.

Abstract: The paper reviews the current state of financial inclusion landscape in Bangladesh to find out strengths and weaknesses. The analysis shows that financial inclusion has been broadened and scaled up many fold over the last ten years. The study finds that the major strengths are the marginal farmers, sharecroppers, and women entrepreneurs who were excluded or underserved can access financial services due to pursuing credit policy of agricultural and CMSMEs, and scale up financial inclusion through agent banking and MFS in rural areas. The paper also finds out some weaknesses such as ‘the missing middle’ segment of MSMEs, existing higher interest rates, very low insurance coverage and delays to adopt NFIS which are critical for broadening financial inclusion in future.

Citation: Islam, M. E., Begum, M. N., Ahmed, R., & Hossain, M. S. (2021). Financial inclusion landscape in Bangladesh: Strengths and weaknesses. Thoughts on Banking and Finance, 8(1), 59–81.

Abstract: Foreign exchange rate volatility is an important factor involved in the decision making of investors and policymakers. This study attempts to measures the volatility behavior in terms of exchange rate returns and volume of daily transactions in foreign exchange market of Bangladesh ranging from July 2014 to June 2018, applying GARCH family models (i.e. PARCH, EGARCH, and IGARCH). The results show that the presence of volatility clustering in foreign exchange rate returns as the volatility of risk is responsive to past shocks and the past volatility influences the current volatility of exchange rate returns. Moreover, the return is positively related to its volatility. The existence of leverage effect is also evidenced in the Bangladesh foreign exchange market because positive past shocks increase volatility more than the negative past shocks of the same magnitude. Thus, the appreciation and the depreciation of Bangladesh Taka against USD do not necessarily cause symmetric variation in he exchange rate returns.

Citation: Yousuf, M., Hossain, M. S., Naser, M. S., & Islam, M. E. (2021). Foreign exchange market structure and exchange rate volatility in Bangladesh. Thoughts on Banking and Finance, 8(1), 82–101.

Abstract: The economy of Bangladesh is leveraging remittances as one of the most important sources of foreign currency inflow into the country. The inflow of remittances helps Bangladesh to maintain an economic-shock resilient foreign exchange market leading to a stable exchange rate of the local currency which in turn ensures smooth foreign trade of the country. Exploring the micro determinants of remittance inflow of Bangladesh can be useful to understand the dynamics of remittance inflow better which consequently should guide us to take proper measures for the smooth inflow of remittances. This paper is an effort to determine the relationship between remittances inflow and its micro determinants especially expatriates’ human capital represented by the level of education. Besides human capital, the paper also examines the impact of expatriates’ age, sex, host country, occupation, number of years spent abroad, etc. on the remittances inflow of Bangladesh. The necessary analysis of this researchis based on the Ordinary Least Square (OLS) method. The source of the cross-sectional data is the Bangladesh Bureau of Statistics (BBS) conducted Household Income and Expenditure Survey (HIES), 2010. The final sample size became 1406 after necessary data cleaning. The paper estimates three different models to find the best one to serve the purpose of the research. The finding of the paper shows that given a one-year increase in education year, we can expect the remittance inflow into Bangladesh to increase by 2.19 percentage. For the age variable, given a one-year increase in the age of expatriates, we can expect the remittance inflow to increase by 1.11 percentage.

Citation: Chowdhury, M. I., Saha, J., Aziz, T., & Islam, M. Z. (2021). Impact of education level of the expatriates on remittances inflow: Bangladesh perspective. Thoughts on Banking and Finance, 8(1), 102–117.