Bangladesh Bank Training Academy Journal

Abstract: The paper shows the difficulties that the increasing international mobility of capitals set to the execution of monetary policy in the development countries. In modern capitalist economies, more than ever, money should be viewed as an institution. Therefore, it is first necessary to understand what are institutions (being money one of them) in order to comprehend the institutional and theoretical prerequisites to monetary policies and monetary stability. In this discussion, we emphasize the challenges that the monetary and financial opening up of many national markets impose for the execution of economic policies. In this sense, we also examine some of the specific institutional prerequisites to monetary stability in the development countries, because of facts as the inconvertibility of their currencies, and the frequent inconsistency of their fiscal, monetary and exchange policies, etc. We try to demonstrate that those institutional difficulties are responsible for the growing appeal f proposals to a complete abandonment of some national currencies, or for the adoption of currency boards in which the policymakers renounce to their power to decide about the liquidity level of their economies, in spite of the formal existence of their national currencies. Finally, we present some suggestions to the solution of the referred problems.

Citation: Strachman, E., & Vasconcelos, M. R. (2014). An institutional analysis of some monetary issues in developing economies (MPRA Paper No. 15128). Thoughts on Banking and Finance, 3(1), 11–34.

Abstract: Allocation of public resources has always been a tricky issue for national government the world over. Primarily governments used beauty contests for selling coal blocks or for allocating oil drill licences. In some countries, lotteries and first-come-first serve methods were also employed. This paper studies the pros and cons of these methods with special reference to allocation through auctions. The Simultaneous Ascending Auction design, used by the FCC for allocation of spectrum licences in the US in 1993 and later on copied in different countries, is analyzed in detail. As a case study, the recent spectrum auctions held in Bangladesh in September 2013 were studied and it was ound that the auction would have performed better if the government would have been able to attract one more bidder.

Citation: Jilani, S. A., & Ansari, V. A. (2014). Studying spectrum allocation methods: Applicability for Bangladesh. Thoughts on Banking and Finance, 3(1), 35–46.

Abstract: This paper attempts to test for the integration among various segments of the financial market in Bangladesh. Both casual observations and statistical analysis presented in this paper indicate that certain components of the money market such as deposit money banks, nonbank financial institutions and government treasury securities market are highly integrated. The market for the instruments of National Saving Directorate is also integrated, albeit with some sort of divergent tendency due to existence of administered interest rate. On the other hand, the interbank call money market and the stock market are not integrated with the rest of segments of the financial system due to their high volatility in the recent past. Deposit rate of the banks is found to be the “reference rate” for the Bangladesh’s financial system. Therefore, efforts must be made to make this rate as much market based as possible since most other rates tend to move in line with the movements of the reference rate. Effetiveness of monetary policy, which generally operates through the short end of the interest rate structure, would also depend on how it impacts the reference rate.

Citation: Masuduzzaman, M., Rahman, M. H., & Ahmmed, S. (2014). Integration of financial market and its implication of stock market development in Bangladesh: An evaluation. Thoughts on Banking and Finance, 3(1), 47–64.

Abstract: The study observes that there is a sustainability risk of school banking product. Such a risk has become a prestige concern to Islami Bank Bangladesh Limited, the largest private commercial bank in Bangladesh. Because recently the Bank has got the crest for contribution in school banking. Therefore the school banking of the IBBL has been undertaken as a case study for sustainability analysis of it. The study uses a cluster randomized design, with 50 schools randomly selected from the IBBL Chittagong zone. Data are from baseline survey with 1,515 student and 1,137 parents and guardians of the students who are from three levels: Primary, Junior High School, and High School. This research focuses on the financial knowledge, attitudes, and socialization of students under school banking of the IBBL as well as the financial knowledge of their parents and guardians with a view to understanding and increasing the students’ ‘financial capability’ on which the sustainability of the school bankin depends. Finally, it suggests four measures to increase the sustainability of the school banking product.

Citation: Ahmed, M., & Khatun, M. (2014). School banking in Bangladesh: A study on sustainability. Thoughts on Banking and Finance, 3(1), 65–76.

Abstract: The dynamic causal relationship between gross national savings and gross domestic product remains a contentious and lively issue in the literature. Even though the literature on this issue is voluminous, however for Bangladesh it is quite nascent. The paper explores the dynamic causal relationship between gross national savings and gross domestic product in Bangladesh over a long period of time (1974-2010) by applying Granger causality test, Johansen and Juselius cointegration test and Engel and Granger error correction models considering the stochastic properties of the variables. The issue of the short run dynamics of savings and other variables within a long run relationship has also been examined in the paper. The estimated results show that both variables are nonstationary at their levels and stationary at first differences. Then using cointegration technique it has been found that both the considered variables are cointegrated, implying that there is a stable long run relationshi between gross national savings and gross domestic product. The error correction model shows that the considered variables drift apart in the short run, however in the long run there is bidirectional causality between savings and economic growth. The implication of the result is that mobilising domestic savings are critical for capital accumulation and so for economic growth. The Granger causality test also shows the same result. Therefore attempts have to be made to increase national savings for capital accumulation and output growth in Bangladesh.

Citation: Haseen, L., & Hossain, M. A. (2014). Savings-economic growth nexus in Bangladesh: Evidence from causality cointegration and error corrections models. Thoughts on Banking and Finance, 3(1), 77–92.