Inflation and economic growth in Bangladesh: An empirical analysis by using VAR model

The main objective of this study is to examine the empirical relationship between inflation and economic growth in Bangladesh for the time period 1976 to 2011. In this study we use Vector Auto-regression (VAR) methodology to investigate the linkage between inflation and economic growth; trade openness and economic growth; and remittances and economic growth in Bangladesh. The major findings of the study shows that inflation and economic growth have a statistically significant negative relationship; remittances and economic growth have a statistically significant positive relationship, whereas a statistically negligible relationship find between trade openness and economic growth in Bangladesh. The findings of the study may be useful for monetary decision makers in Bangladesh to keep inflation rate at a reasonable rate which is consistent with economic growth in Bangladesh.