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Exchange Rate and Investment in the Manufacturing Sector of Bangladesh

M. Habibur Rahman & M. Ismail Hossain

 

Abstract

The study is an attempt to empirically examine the existence of long run equilibrium relationship between the real exchange rate and private manufacturing investment in Bangladesh. Appreciation (depreciation) of the real exchange rate has been found to have a negative (positive) impact on the level of private manufacturing investment both in the long and in the short run. In addition, gross domestic product is also found to have significant effect on investment. The short run dynamic model suggests stability in the equilibrium relationship.

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