Bangladesh Bank Training Academy Journal

Abstract: Volatility in the stock prices behavior is a normal phenomenon. This is a key element for pricing financial instruments. Financial market volatility also has a wider impact on financial regulation, monetary policy and the macro economy. Study use, daily closing prices data of “DSEX” Broad Index during January 28, 2013 to December 31, 2015. The ARCH and GARCH models are used to estimate the volatility and Phillip Parron test for stationary. Estimated results revealed that the volatility in the Dhaka stock market follow GARCH (1, 1) model i.e. volatility in the Dhaka stock market depends on the past shock in the residual square and the past shock in the variance. Estimated results also revealed its stylized facts volatility clustering, fat tails, persistence of volatility and mean reverting in the series under analysis. The results of the study have useful implications for regulators and policy makers in the Dhaka stock market.

Citation: Begum, L. A., Sultana, N., & Mondal, M. S. (2016). Modeling and estimating volatility in Dhaka stock market. Thoughts on Banking and Finance, 5(2), 9–23.

Abstract: This study examines the impact of bank credit to the private sector on economic growth in Bangladesh from supply side perspectives. The study has applied Johansen co-integration approach and Error Correction Model using the time series data for the period of 1980-2015. Based on the sample data and methodology, we found that there is a positive long run relationship between real private sector credit and real GDP. More specifically private sector credit can alone explain 40 percent of variation of GDP in the long run in Bangladesh. But in short run, real GDP adjusts toward the equilibrium path once the system is shocked. However, in the short run, the adjustment path of real rivate sector credit to maintain the long run relationship is somewhat opposite towards equilibrium. This means that in the short run, changes in real private sector credit cannot contribute positively to restore the long run relationship if there is an imbalance in the system. So, private sector credit should be cosidered cautiously and given priority to productive sectors as unnecessary or unproductive credit to private sector unable to play active role to accelerate output growth.

Citation: Biswas, B. P., & Masuduzzaman, M. (2016). Bank credit and economic growth nexus: Bangladesh perspective. Thoughts on Banking and Finance, 5(2), 24–39.

Abstract: The paper examines the dynamic linkage between the budget deficit and interest rate in Bangladesh over a long period of time (1974-2014) by applying standard techniques of time series analysis, i.e. cointegration, error correction models and Granger causality tests. It is evident that the data series are integrated of order one, i.e. they are non stationary at their levels and first difference makes them stationary. Then Johansen Juselius technique established that the considered variables are cointegrated, implying that there is a stable long run relationship between the two. However, to take care for the short run disequilibrating relationship, we have estimated the error correction model, which shows that the impact of budget deficit on interest rate is not instantaneous. The error correction model also shows bidirectional causality between the variables, which is also supported by the Granger causality test.

Citation: Hossain, M. A. (2016). Casualty between budget deficit of interest rate: The case of Bangladesh. Thoughts on Banking and Finance, 5(2), 40–49.

Abstract: Efficient waste management becomes a crucial issue for ensuring a sound environment and sustainable economic activities in Bangladesh. Throughout the entire business cycle, if waste can not treat properly in every stage, it may shrink a significant portion of the entire return. By ensuring proper waste management, it's possible to transform a large volume of waste into resources which results remarkable positive impact on environment, operating cost and business income besides ensuring employment. In this regard, banking sector among different stakeholders, may contribute a lot by implementing waste management techniques through its in-house practices and financing. The study reveals that, current status of banks in Bangladesh has received an appreciating attention in linking waste management till date and the bankers' perception in this regard needs to go far beyond to make the banking activities more acceptable and sustainable.

Citation: Rahman, T. (2016). Linking waste management with banking sector in Bangladesh: Status and perception. Thoughts on Banking and Finance, 5(2), 50–71.

Abstract: This paper converses a primary element responsible for exchange rate movements of the US dollar against the Bangladeshi Taka. The dynamic effects of real and nominal shocks are scrutinized through conducting a structural vector autoregression (SVAR) model of real and nominal exchange rates with the assumption of the long-run neutrality restriction of nominal shocks on real exchange rate. In order to identify how these factors influence exchange rate variations, this approach allows us to decompose exchange rate movements into two components, real and nominal factors. This empirical analysis demonstrates the effect of a real shock on the real and nominal exchange rate is of a persistent nature, resulting in a long-run real appreciation and the effect of a nominal shock on the nominal exchange rate demonstrates that nominal shock takes around five months to maintain negative direction (depreciation) in the nominal exchange rate in Bangladesh.

Citation: Sarker, M. N. A., Hasan, M. S., & Rahman, M. A. (2016). Real or nominal shock: What drives the exchange rate movements in Bangladesh. Thoughts on Banking and Finance, 5(2), 72–89.

Abstract: This article empirically examines the dynamics of the interest rate pass-through mechanism for Bangladesh, by formulating and using an independent variable 'weighted average policy rate' (a combine rate constituted by using all policy rates of Bangladesh Bank - the central bank of Bangladesh) and lending rate, deposit rate and call money rate as dependent variables representing the lending, deposit and money market channels, respectively. We have used quarterly data for the period of 2003,Q1 -2015,Q4 published by Bangladesh Bank. The commonly used error correction and Engle-Granger (EG) models are used to examine the short-run and long-run pass-through respectively; a vector error correction (VECM) impulse response function (IRF) were employed to measure the short-run speed of the pass-through. Further, the Wald Test of Coefficient was used to measure the magnitude of the long run pass-through. We find that there is a symmetric, incomplete and very sluggish pass-through in Bangladesh fr all lending, deposit and money market channels. We also found the greatest impact on the lending rate channel (40 percent) in short-run, while the adjustment speed is very slow in the all channels. In our understanding such paled profile of Interest Rate Pass-though in Bangladesh is due to non-reliance of Bangladesh Bank on interest rate tool for implementation of monetary policy.

Citation: Kashem, M. A. (2016). Dynamics of interest rate pass-through in Bangladesh: An economic investigation for 2009–2015. Thoughts on Banking and Finance, 5(2), 90–113.

Abstract: Tourism is considered one of the largest and rapid growing economic sectors in the corporate world. It is one of the fastest and dynamic international industry sectors. Many countries like Malaysia, Cambodia, Vietnam, Kenya, SriLanka, South Africa, and Peru have developed their economy through proper utilization and management of tourism sector. Like many other developing countries, Bangladesh has enormous potential to improve tourism sector and related economy. In Bangladesh, we have not only the longest sandy sea beach Cox'sBazar and the largest single tract of mangrove forest Sundarbans but also many other natural, cultural, religious and historical sites which have huge potentials to be unique selling points for us. Due to lack of effective policies and their implementation, proper marketing strategy and promotion, Bangladesh has not seen a huge tourist's crowd as expected. Tourism sector can set up a sustainable economic trend in Bangladesh if philosophy of proper marketing stratey formation and implementation can be established. Considering the importance of tourism sector, integrated marketing strategy can play a vital role. Through integrated marketing strategy, our tourist spots can be focused in a clear, consistent and persuasive way to the whole world.

Citation: Reza, S. (2016). Integrated marketing strategy and development of tourism sectors: A case of Bangladesh. Thoughts on Banking and Finance, 5(2), 114–129.