Impact of Monetary Policy Changes in a Semi-Global Economy: Evidence from Bangladesh

The study examines the impact of changes in monetary policy in Bangladesh. Specifically, the study examines the impact of domestic and foreign monetary shocks on Bangladesh’s major economic aggregates.In the context of a semi-global economy such as Bangladesh, the conduct of monetary policy becomes increasingly more difficult as globalization proceeds. It becomes important to examine the impact of changes in relevant 'foreign' variables (e.g., interest rate, money supply, exchange rate)while formulating domestic monetary policy. The empirical results of the present analysis show that innovations to foreign money supply have significant impacts on Bangladesh's real exchange rate,interest rate,land output.[Bangladesh Bank WP NO 0902]