The objective of this paper is to find the variables that are important in determining the demand for money in Bangladesh and the way they affect it. A large number of both theoretical and empirical exercises have been carried out for matured capitalist countries to support the monetary hypothesis that the demand for money must be related to interest rate changes. Although the institutional arrangement in which the theory was posited did not apply to most of the LDCs many authors showed the existence of inverse relationship between demand for money and interest rate in many LDCs including Bangladesh without giving any adequate theoretical justification of such a relationship. In the absence of institutional environment of the matured capitalist economy one can expect that the demand for money in LDCs would be determined primarily by transaction motive only. The empirical results presented in this paper suggest that the publics’ desired cash holdings are functionally related to the level of income, foreign aid and the price level or inflation rate. An increase in real income and inflow of foreign aid tends to increase the demand for money while an increase in the price level (or inflation rate) tends to lower it. Apparently there is a need for cost-benefit analysis of fertility reduction. The cost-benefit ratio of most countries vary between 1:10 to 1:30, for Bangladesh it is 1:16. Certain macro-model studies indicate that higher the intensity of fertility reduction and shorter the period of required decline, the higher will be the benefits expected in terms of gains in per capita income. There is however a contradiction between national and household interests. The latter’s decision for having more children has a negative spill over effect which nullifies the gains of the community.

Apparently this is where the role of family planning programme comes in, which although operative for along time suffered serious set-back during and after the liberation of Bangladesh mainly due to administrative reasons. Under such conditions mobilization of government machinery and raising the consciousness of people is a necessity.