Monetary Interpretation of Exchange Rates in the South Asian Countries
Author: Mohammad Yunus
This paper attempts to analyse the extent of influence of the monetary factors in determining exchange rate in the developing countries. In doing so, it presents empirical evidence on the monetary model of exchange rate determination for five South Asian countries over the post-Bretton Woods period using the Johansen multivariate cointegration technique. It finds supportive evidence of long-run relationships between the official and the market exchange rates and the so-called fundamentals. This implies that market fundamentals accounted for the substantial loss of the external values of the currencies over the period under consideration. Therefore, a prudent pursuit of monetary policy is a prerequisite for maintaining stable exchange rate in the long-run in these countries. However, statistical testing of popular restrictions resoundingly rejects the monetary model. Two conclusions are reached: the monetary model can still be a valid representation of the long-run behaviour of the exchange rates; and that the restrictions imposed on the model are in general not valid in view of complex dynamics in the exchange rate determination process.
Microcredit and Savings of Rural Households in Bangladesh
Author: Muhammad Abdul Latif
Households in Bangladesh This paper attempts to analyse the effect of microcredit on household savings. There are over 850 Government and Non-Government Micro Finance Institutions (MFIs) operating at national or various local levels which provide the rural poor who are landless or functionally landless with group-based small credit with the objective of increasing self-employment and income and thereby alleviating poverty. The paper hypothesizes that this microcredit has positive effects on savings of the participated households. The analysis is done with the data derived from a sample survey of 2599 households relating to the financial year 1998/99. The households include both programme participants and non-participants. The hypothesis is tested statistically by controlling for such variables as income and land-ownership which also influence saving, and found that microcredit has statistically significant independent effect on household savings. The policy implications that follow from the analysis are to continue with the programmes and formalize them beyond the land-poor.
Inequality and Its Sources in Bangladesh,1991/92 to 1995/96: An Analysis Based on Household Expenditure Surveys
Author: Azizur Rahman Khan Binayak Sen
Official estimates of personal income and its inequality, based on the Household Expenditure Surveys, suffer from inaccurate definition of income and inappropriate procedure for the estimation of inequality. This paper re-estimates personal income and expenditure and their components from the Household Expenditure Surveys of 1991/92 and 1995/96, estimates Gini ratios of income and expenditure distributions and corresponding concentration ratios of the distributions of their components. These results show that the level of inequality in Bangladesh is lower than the official estimates suggest while the rate of increase in inequality during the period under review has been greater than is shown by official estimates. The rising inequality has largely been due to the rising share in income of certain components that are disequalizing (i.e., disproportionately concentrated among the higher income groups) as well as a rise in the extent of their disequalizing effect. For Bangladesh as a whole a good part of increased inequality has been due to the sharp increase in inequality between urban and rural areas. The paper concludes by considering the implications of the findings for policies for poverty-reducing growth in Bangladesh.