Currency Crisis in Bangladesh Economy: Some Insights

A. F. M. Ataur Rahman^1, and Reshman Hasan²

¹Associate Professor, Department of Economics, North South University

²Reshman Hasan, Department of Economics, North South University

Cite this paper:
A. F. M. Ataur Rahman and Reshman Hasan. Currency Crisis in Bangladesh Economy: Some Insights. Journal of Finance and Economics. 2014; 2(1):7-16. doi: 10.12691/jfe-2-1-2

Abstract

Many countries around the world have faced currency crisis where they experienced substantial devaluation of local currency vis-à-vis some strong international currency within a short span of time resulting disruption in nominal as well as real activities. Although Bangladesh is not one of them yet in an integrated world possibility of experiencing such crisis is not remote. Using the concept of Exchange Market Pressure (EMP) in this paper we have tried to measure pressure on exchange rate in Bangladesh and then tried to find an early warning indicator of building EMP for Bangladesh. We found that in some occasions exchange rate situations got little erratic but never to the extent of crisis. We also found that before building up exchange rate pressure current account is most probably to show an early warning for Bangladesh. And ratio of M2 and reserve actually moves along with EMP index, so it may not be too informative for identifying currency crisis beforehand.

Keywords:
Bangladesh economy Exchange Market Pressure crisis

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