Money growth and prices in Bangladesh

Tuhin G. M. Al Mamun and Dr Rahim Md Abdur · Statistical report · 2026-11-14

Cite as: Al Mamun, Tuhin G. M., and Dr Rahim Md Abdur (2026). Money growth and prices in Bangladesh. BIQEP Policy Briefs. Archived at https://doi.org/10.5281/zenodo.24215521.

Key findings

• Broad money, % of GDP: Bangladesh 47.85 (2025), peer median 70.78; rank 5 of 7; change over ten years -16.65 (peer median +12.69).
• CPI inflation, %: Bangladesh 8.77 (2025), peer median 2.53; rank 7 of 7; change over ten years +2.57 (peer median -3.48).
• Domestic credit to private sector, % of GDP: Bangladesh 34.50 (2025), peer median 45.52; rank 6 of 7; change over ten years -9.90 (peer median +9.22).
• Models: the response of CPI inflation to a shock in broad money/GDP is of the same sign across specifications; 0 of 5 bands exclude zero at the peak (Table 1).

1. Question

Do changes in broad money move inflation in Bangladesh, and how does money relate to credit and output? We answer with official data, benchmarking against six regional peers and several estimators that make different assumptions; the results are reported whatever they show.

2. Data

Annual series from the World Bank World Development Indicators for Bangladesh, retrieved on 2026-11-14, years 1992–2025 (34 observations after transformation). The 12 variables are: Change in broad money/GDP (pp); CPI inflation (%); Real GDP growth (%); Change in private credit/GDP (pp); Change in lending rate (pp); Change in deposit rate (pp); Depreciation of the Taka (%); Change in exports/GDP (pp); Change in imports/GDP (pp); Private consumption growth (%); Change in investment/GDP (pp); Change in unemployment (pp). Transformations: growth rates and percentage changes where the series is a level, first differences where it is a ratio.

Validation. Single compiled source for most series. Real GDP growth and CPI inflation were compared with the IMF DataMapper series for 2015–2025 (IMF: NGDP_RPCH, PCPIPCH); see the data-validation note in the Statistical report on inflation, the Taka and policy stance for the gaps found (up to 0.05 percentage points for GDP growth and 1.6 for inflation). Gaps in peer data are shown with the year used.

3. What the data show

Figure 1 plots four headline series. Figure 2 and Table 2 compare Bangladesh with six peers on the latest available year; rank 1 is best on the direction indicated.

Table 2. Peer benchmarks. Peers: India, Pakistan, Sri Lanka, Viet Nam, Indonesia, Nepal.

4. Empirical strategy

We trace the response of CPI inflation to a shock in broad money/GDP. Models, all run in Open Econometric Systems: (i) a Bayesian VAR with a Minnesota prior on 12 variables (shock ordered first), with a variation in lag length and prior tightness; (ii) a four-variable VAR with a recursive ordering; (iii) local projections with Newey–West standard errors. The large system is possible only in the Bayesian model: an unrestricted VAR on 12 variables with two lags has 25 coefficients per equation for about 34 usable observations, leaving too few degrees of freedom for reliable estimates. Recursive identification is an assumption; the responses are dynamic correlations conditional on the ordering, not causal effects.

5. Results

Figure 3 shows the response to a one-standard-deviation shock (sd = 2.89, in the units of the shock series). The response one year after the shock is of the same sign across specifications. 0 of 5 bands exclude zero at the largest response (Table 1). The BVAR bands are 68% credible bands and the VAR and local-projection bands are 95%, so they should not be compared directly.

Table 1. Response of CPI inflation to a shock in broad money/GDP.

6. Policy assessment

Where the record supports criticism

Bangladesh is more than 5% below the peer median, and its ten-year change is worse than the peer median change.

1. Broad money, % of GDP: Bangladesh 47.85 (2025), peer median 70.78; rank 5 of 7; change over ten years -16.65 (peer median +12.69).
2. CPI inflation, %: Bangladesh 8.77 (2025), peer median 2.53; rank 7 of 7; change over ten years +2.57 (peer median -3.48).
3. Domestic credit to private sector, % of GDP: Bangladesh 34.50 (2025), peer median 45.52; rank 6 of 7; change over ten years -9.90 (peer median +9.22).
4. Real GDP growth, %: Bangladesh 3.49 (2025), peer median 5.03; rank 7 of 7; change over ten years -3.06 (peer median +0.34).

Where the evidence is not strong enough

• Dynamic effects: 0 of 5 impulse-response bands exclude zero, so the estimated effect of broad money/GDP on CPI inflation cannot be stated precisely with annual data.

Implications for discussion

Judgements drawn from the record, not estimates.

• A published real-rate benchmark would make the stance of policy easy to judge.
• Money and credit aggregates should be reported with inflation on a common release calendar.

7. Limitations

• Annual data give about 34 observations; responses at one to six years are fragile.
• Recursive identification is an assumption, not a result.
• Peer comparisons use each country's latest year, which differs for some indicators; ten-year changes use the year ten years before the latest.
• Peer groups reflect economies of comparable region or size and are a choice; other groups could change ranks.

Data and replication

• data.csv (12 variables)
• results.json
• Figures at 300 dpi (PNG) and vector (SVG) in the same folder: fig1_stylised_facts, fig2_peer_comparison, fig3_impulse_responses.

Sources

• World Bank, World Development Indicators: api.worldbank.org, retrieved 2026-11-14.
• Models: Open Econometric Systems, github.com/tuhingm/open-econometric-systems.