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Inflation in Bangladesh : A Reexamination of the Structuralist – Monetarist Controversy

Mohammad Ali Taslim

 

Abstract

Inflation has become an endemic feature of today’s world, specially of the developing countries. Two broad schools of thought have emerged regarding the causes of inflation. The structuralists view it as a structural problem, that is, they see it essentially as the inevitable result of trying to push development strategies without making the necessary structural reforms. The monetarists, on the other hand, view inflation as a monetary phenomenon caused by inappropriate monetary and fiscal policies.

This paper attempts to analyse the inflationary process in Bangladesh in the light of the structuralist-monetarist controversy. To this end, three models of inflation are constructed and tested : a purely structuralist one, a purely monetarist one, and a hybrid model. The hybrid model performs best, suggesting that at least for Bangladesh, both sets of factors are relevant.

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