KEY DETERMINANTS OF INFLATION RATE IN BANGLADESH

Abstract

Inflation can be said to be the backsliding taxation against the poor. Bangladesh has shown a consistent growth over the past decade but inflation has always been alongside it. The paper shows the causal relationship of inflation with its determinants. The objective of this study is to estimate the influence of the factors of inflation which in turn influences the existent, rise & fall of the inflation rate. Probable factors like GDP, Real Interest rate, Export of Goods and Services and Foreign Direct Investment (FDI) are chosen and worked with. Secondary data from year 1980 to 2015 have been used to create an econometric model. It has been found that GDP and Interest rate shows negative relationship with inflation and the other two variables shows a positive relation with inflation rate. The study suggests to take necessary steps like increasing GDP and decreasing the export of goods and services, etc. to keep the inflation rate under control as per the result.