Report on Monetary Policy of Bangladesh

Topics: Monetary policy, Inflation, Macroeconomics Pages: 11 (3460 words) Published: April 4, 2011
1 Introduction:

Monetary policy is the process by which the central bank of a country controls the supply of Money, the availability of money, and the cost of money or rate of interest, in order to attain a set of objectives oriented towards the growth and stability of the economy. Fiscal policy induced “demand management” approach as propagated by Keynes, which was popular in the post‐Great Depression period, later made way to monetary policy led “stabilization” approach in the period of high inflation of 1970s. While traditional fiscal policy solutions were useful in confronting unemployment by increasing spending and cutting taxes, counter‐acting inflation entailed reducing spending or raising taxes.

The growing importance of monetary policy and the diminishing role played by fiscal policy in economic stabilization efforts may reflect both political and economic realities. Monetary and fiscal policies differ in the speed with which each takes effect as the time lags are Variable. Monetary policy is flexible (rates can be changed each month) and emergency rate Changes can be made, whereas changes in taxation take longer to organize and implement. Also, considerable time may pass between the decisions to adopt a government spending programmer and its implementation. During the period of “Golden Growth” covering late 1980s till the recent past, in the mix of macroeconomic policies, monetary policy continued to reserve a place of prominence. However, in the backdrop of global financial meltdown and subsequent confusion in macroeconomic theories, a new quest has emerged in redefining the role and instruments of macroeconomic policy in fostering economic development. 1.1 origin of the report:

Our respective instructor Kohinur Akter has authorized us to organize a project paper on the basis of “Monetary policy statemant”. Here, we have gathered several information to find out why, how and where to monetary policy work out in the economy and maintain price stability, high levels of production, emplyment, economic growth and level of inflation. 1.2 Objective of the study

The objective of our study can be divided into two categories. They are given bellow: Primary Objective:
* The primary objective of this report is to meet the requirement of the course, Business Environment. Secondary Objective:
* The Report on Business Environment in Bangladesh basically shows the monetary policy of Bangladesh. Our secondary objectives are as follows: * To get general idea about the monetary policy of Bangladesh Bank. * To analyses various sectors of monetary policy.

1.3 Methodology
Source of information
* Internet websites
* Newspapers
* To prepare this report we have collected data from different materials. * Then we have conducted a secondary study. We have also collected data from the internet; this way we collected primary data. Thus, we have used secondary information to prepare this report.   We collected information from several websites

1.4 Limitation of the study:
i) Lack of information
ii) Time limitation.
iii) Lack of knowledge

Chapter 2
Monetary policy
2.1 Monetary policy stance for H2 FY10:
The monetary stance for H2 FY10 will essentially be a Continuation of the stance for H1 FY10 announced in July 09, with adjustments taking into account the developments unfolding in H1. The primary role in spurring higher growth is for fiscal rather than monetary policies; efficient and expeditious ADP implementation will create conditions crowding in private sector investments, facilitated by congenial monetary regime. Without fiscal policies in full engagement in its due role, underperformance in growth can heighten inflationary risks from permissive monetary conditions.

monetary policies of BB seek to support enhancement not only in quantum but also in quality of growth measured in terms of inclusiveness and environmental...
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