DETERMINANTS OF GDP PER CAPITA IN BANGLADESH: AN EMPIRICAL STUDY
Keywords:
GDP per capita, Inflation Rate, Exchange Rate, Total Reserves (includes gold and USD).
Abstract
When making cross-country comparisons regarding the well-being and economic conditions of a population, GDP per capita is the most commonly used indicator. Hence, various economic indicators can affect GDP per capita. This study investigates the impact of inflation, exchange rate, and total reserves (including gold and USD) on GDP per capita in Bangladesh. The study employs a quantitative approach and follows a longitudinal research design. Time series data from 2012 to 2021 is collected using a stratified random sampling technique from the World Development Indicators provided by the World Bank. A range of statistical tests, such as Normality Test, Multivariate Outlier Analysis (Mahalanobis Distance), Multicollinearity Assessment (Tolerance and VIF), Goodness-of-Fit (GoF) Test, ANOVA Test, and Multiple Regression Analysis, were performed using SPSS v.22. The results reveal that exchange rate has a significant influence on GDP per capita, making it crucial factor for economic development, resilience, and export competitiveness. Total reserves were found to have minimal relation with GDP per capita. In contrast, inflation rate, although adversely impacting GDP per capita, remains important for maintaining overall economic stability. Thus, the findings of this study suggest that effective currency management is paramount for economic development.
JEL Classification Codes: E31, F31, O47.
References
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Salan, M. S. A., Naznin, M., Pandit, B., Sumon, I. H., Hossain, M. M., Kabir, M. A., & Majumder, A. K. (2023). Relationships between total reserve and financial indicators of Bangladesh: Application of generalized additive model. Plos one, 18(4), e0284179. https://doi.org/10.1371/journal.pone.0284179
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Semuel, H., & Nurina, S. (2014). Analysis of the effect of inflation, interest rates, and exchange rates on Gross Domestic Product (GDP) in Indonesia (Doctoral dissertation, Petra Christian University). Retrieved from https://repository.petra.ac.id/id/eprint/17008
Shourave, S.J. (2020). FDI Inflows in Bangladesh and Its Impact on Export, Employment Generation and GDP. International Journal of Economics and Management Science, 5(8), 1-4.
Singh, P. (2013). Depreciation of Rupee in Indian Economy: An Analysis, International Journal of Innovations in Engineering and Technology (IJIET), 2(4), 332.
Teshome, K. (2006). The impact of government spending on economic growth: the case of Ethiopia. Unpublished master’s thesis, Addis Ababa University, Addis Ababa, Ethiopia.
Voumik, L. C., & Smrity, D. Y. (2020). Forecasting GDP Per Capita in Bangladesh: Using Arima Model. European Journal of Business and Management Research, 5(5), 1-5. https://doi.org/10.24018/ejbmr.2020.5.5.533
Ayhan, D., & Turgutlu, E. (2015). Dynamics of international reserve accumulation in Turkish economy. Journal of Economics and Management, 20(A), 59-72.
Ayyoub, M., Chaudhry, I. S., & Farooq, F. (2011). Does Inflation Affect Economic Growth? The case of Pakistan. Pakistan Journal of Social Sciences (PJSS), 31(1), 51-64.
Barro, R.J. (1995). Inflation and Economic Growth. NBER Working Paper Series, 5326.
Bentum-Ennin, I. (2014). International reserves accumulation and economic growth in the West African Monetary Zone. International Research Journal of Marketing and Economics, 1(9), 31-56.
Billor, N., Chatterjee, S., & Hadi, A. S. (2006). A re-weighted least squares method for robust regression estimation. American journal of mathematical and management sciences, 26(3-4), 229-252. https://doi.org/10.1080/01966324.2006.10737673
Broda, C. (2004). Terms of trade and exchange rate regimes in developing countries. Journal of International economics, 63(1), 31-58. https://doi.org/10.1016/S0022-1996(03)00043-6
Dipietro, W. R., & Anoruo, E. (2006). GDP per capita and its challengers as measures of happiness. International Journal of Social Economics, 33(10), 698-709. https://doi.org/10.1108/03068290610689732
Dynan, K., & Sheiner, L. (2018). GDP as a measure of economic well-being (Vol. 43, p. 1-53). Hutchins Center Working Paper.
Elistia, E., & Syahzuni, B. A. (2018). The correlation of the human development index (HDI) towards economic growth (GDP per capita) in 10 ASEAN member countries. Journal of humanities and social studies, 2(2), 40-46.
Ferdous, M. R., Wesselink, A., Brandimarte, L., Slager, K., Zwarteveen, M., & Di Baldassarre, G. (2019). The costs of living with floods in the Jamuna floodplain in Bangladesh. Water, 11(6), 1238. https://doi.org/10.3390/w11061238
Feyera, G. (2015). The nexus between Inflation rate, Gross National Saving rate and per capita income growth rate in Ethiopia: the co-integrated VAR approach (Doctoral dissertation, Addis Ababa University).
Formánek, T. (2019). GDP per capita in selected EU countries: Economic growth factors and spatio-temporal interactions examined at the NUTS2 level. Journal of International Studies, 12(1), 119-133.
Friedman, M. (1963). “Inflation: Causes and Consequences.” In Dollars and Deficits: Inflation, Monetary Policy and the Balance of Payments, edited by Milton Friedman, 21–71. Englewood Cliffs, NJ: Prentice-Hall. (First published 1963. Bombay: Asia Publishing House for the Council for Economic Education).
Gillman, M., & Kejak, M. (2011). Inflation, investment and growth: a money and banking approach. Economica, 78(310), 260-282. https://doi.org/10.1111/j.1468-0335.2009.00814.x
Hassan, G. M., & Shakur, S. (2017). Nonlinear effects of remittances on per capita GDP growth in Bangladesh. Economies, 5(3), 25. https://doi.org/10.3390/economies5030025
Hossain, M. A. (2008). Impact of foreign direct investment on Bangladesh’s balance of payments: Some policy implications. Policy Note, 805, 1-9.
Huque, K. S., & Khan, M. Y. A. (2017). Socio-geographic distribution of livestock and poultry in Bangladesh-a review. Bangladesh Journal of Animal Science, 46(1), 65-81. http://dx.doi.org/10.3329/bjas.v46i1.32180
Ilter, C. (2017). What economic and social factors affect GDP per capita? A study on 40 countries. Journal of Global Strategic Management, 11(2), 51-62.
Islam, S. M. M., & Biswas, S. (2009). Exchange Rate and its impacts on GDP and Inflation in bangladesh. ASA University Review, 3(2), 65-82.
Islam, S., Ghosh, S., & Podder, M. (2022). Fifty years of agricultural development in Bangladesh: a comparison with India and Pakistan. SN Business & Economics, 2(7), 71. https://doi.org/10.1007/s43546-022-00240-3
Mahalanobis, P. C. (1936). A note on the statistical and biometric writings of Karl Pearson. Sankhyā: The Indian Journal of Statistics (1933-1960), 2(4), 411-422.
Mahraddika, W. (2019). Does international reserve accumulation crowd out domestic private investment?. International Economics, 158, 39-50. https://doi.org/10.1016/j.inteco.2019.02.003
Matsumoto, H. (2018). Reserve accumulation, foreign direct investment, and economic growth. In 2018 Meeting Papers (No. 237, pp. 241-262). Society for Economic Dynamics.
Morrissey, O. (2005). Imports and implementation: Neglected aspects of trade in the report of the commission for Africa. Journal of Development Studies, 41(6), 1133-1153. https://doi.org/10.1080/00220380500188107
Polterovich, V., & Popov, V. (2003). Accumulation of Foreign Exchange Reserves and Long Term Growth. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1751866
Qian, X., & Steiner, A. (2017). International reserves and the maturity of external debt. Journal of International Money and Finance, 73, 399-418. https://doi.org/10.1016/j.jimonfin.2017.02.015
Raihan, S., & Khan, S. S. (2020). Structural transformation, inequality dynamics, and inclusive growth in Bangladesh (No. 2020/44). WIDER Working Paper.
Salan, M. S. A., Naznin, M., Pandit, B., Sumon, I. H., Hossain, M. M., Kabir, M. A., & Majumder, A. K. (2023). Relationships between total reserve and financial indicators of Bangladesh: Application of generalized additive model. Plos one, 18(4), e0284179. https://doi.org/10.1371/journal.pone.0284179
Sawada, Y., Mahmud, M., & Kitano, N. (2018). Economic and social development of Bangladesh. US: Springer International Publishing.
Semuel, H., & Nurina, S. (2014). Analysis of the effect of inflation, interest rates, and exchange rates on Gross Domestic Product (GDP) in Indonesia (Doctoral dissertation, Petra Christian University). Retrieved from https://repository.petra.ac.id/id/eprint/17008
Shourave, S.J. (2020). FDI Inflows in Bangladesh and Its Impact on Export, Employment Generation and GDP. International Journal of Economics and Management Science, 5(8), 1-4.
Singh, P. (2013). Depreciation of Rupee in Indian Economy: An Analysis, International Journal of Innovations in Engineering and Technology (IJIET), 2(4), 332.
Teshome, K. (2006). The impact of government spending on economic growth: the case of Ethiopia. Unpublished master’s thesis, Addis Ababa University, Addis Ababa, Ethiopia.
Voumik, L. C., & Smrity, D. Y. (2020). Forecasting GDP Per Capita in Bangladesh: Using Arima Model. European Journal of Business and Management Research, 5(5), 1-5. https://doi.org/10.24018/ejbmr.2020.5.5.533
Published
2023-10-28
How to Cite
Ali, M. I., & Faisal-E-Alam, M. (2023). DETERMINANTS OF GDP PER CAPITA IN BANGLADESH: AN EMPIRICAL STUDY. American Economic & Social Review, 11(1), 1-7. https://doi.org/10.46281/aesr.v11i1.2106
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Original Articles/Review Articles/Case Reports/Short Communications
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