Inflation in Bangladesh: Supply Side Perspectives

This policy note is an exploratory attempt to verify the popular argument that cost side factors are no less contributory than demand side factors in stimulating inflation in the Bangladesh economy. There is historical and contemporary evidence in favour of this argument. An analysis of the inflation trend of recent years is suggestive of significant mutual relationship between consumer price inflation and supply side phenomena such as import cost, oil price hike, exchange rate and production shocks. Wage inflation, however, has been found to be weakly related to inflation. The findings of the study should prompt policy makers to take supply side issues into account while taking steps to contain harmful inflation so that possible mistreatment can be avoided.