Macroeconomic Performance During Adjustment: The Case of Bangladesh
Author: Salma Chaudhuri Zohi
The present study attempts to look into the impact of structural adjustment on macroeconomic performance covering the period up to 1992/93. The "before-after" approach is the most widely used approach and hence has been used for the analysis of this paper. The analysis suggests that the structural adjustment policies in Bangladesh has been implemented gradually, with policy changes introduced in phases. The review of macroeconomic performance suggests that the nature of structural adjustment pursued may be termed as "corrective": it improved the fiscal and external balances but at the cost of reduced public investment and stagnant GDP growth at around 4 per cent during the adjustment period. The decline in public investment appears to have affected private investment. Bangladesh had only meagre foreign investment. Desirable structural adjustment policies should lead to expansion of tradable output. But contrary to the expectation, the output growth in the tradable sector was significantly lower than that of non-tradable. The share of expenditure in GDP remained at around 15 per cent. Although the share of social sectors as a whole increased slightly, that of the health sector has fallen during the adjustment period. The structure of export changed from traditional to non-traditional. Export growth was larger than the target due to expansion in readymade garment and knitwear. Under the MFA, Bangladesh has guaranteed access to the US market and under the GSP, Bangladesh has unrestricted duty-free entry into the countries of the European Union, which gave it a competitive edge over other exporting countries. The phasing out of preferential access by the year 2005 is a matter of great concern. In order to survive beyond 2005, there is an urgent need to set up backward linkages domestic textile industries.
Money and Economic Activity in Bangladesh: A Rational Expectations Approach
Author: Nazma Begum
The study aims to test the hypothesis that only unanticipated movements in money affect real economic variables which is explicit in the rational expectations monetary models. The hypothesis is tested by using Bangladesh data. A money growth model for Bangladesh is specified. Unanticipated Money Growth (DMR) is defined as the residuals of the money supply equations. A macroeconometric model for Bangladesh is developed consisting of five equations. The equations are estimated by including both Unanticipated Money Growth (DMR) and Actual Money Growth (DM). The empirical result of the study is not encouraging for supporting the hypothesis that only unanticipated movement in money growth affects real output.
Long-Srun Dynamics and Causality in the South Asian Foreign Exchange Markets
Author: Mohammad Yunus
The paper sheds light on the long-run dynamics between the official and parallel market exchange rates in five South Asian countries, using the relatively new Johansen cointegration approach and a few variants of causality tests. While the evidence shows strong long-run relationship between the two rates, neither the transformed official and the parallel market rates enter the long-run equilibrium affect both the rates equally. The evidence of direct causal relationship between the two rates is very weak. However, strong feedback mechanism between the two rates is evident if the effect of error-correction term is considered in the analysis.
Elasticity Estimates by Occupational Groups in Bangladesh: An Application of Food Characteristics Demand System
Author: A. Razzaque, B.H. Kh
The study estimates demand elasticities using the food characteristics demand system for eight different occupational groups in Bangladesh. The methodology, based on the assumption that every food item contributes to overall energy and variety in the diet which together maximises the utility from energy, variety and tastes of individual foods suggests that with increase in incomes, most occupational groups are likely to increase their consumption for non-cereal food items. An agricultural production strategy which emphasises on cereals, particularly on rice, at the expense of other non-cereal crops may thus lead to the emergence of a serious mismatch between the choice of individual food item and its supply in the long run. The high income elasticities of several items e.g. fish, beef, milk and vegetables call for medium to longer term policy interventions to bring about a structural change in the pattern of existing food production in the country.