Impact of Monetary Policy on Inflation in Bangladesh: An Econometric Analysis

Abstract

This study investigates how the state of inflation in Bangladesh is affected by monetary policy between 2015 and 2024. The main goals of the study have to find out which economic factors are the most important in affecting inflation and how well these devices are applied to preserve price stability in the global economy. This study also aims to understand how the supply of money, credit growth, foreign reserves, and economic development affect the overall inflation rate because inflation is a frequent problem in Bangladesh that affects homes, businesses and long -term economic plans. The study was used to assess several regression analysis and secondary data to assess relations between inflation and several important indicators, such as GDP, M1 (narrow money), M2 (comprehensive funds), reserved funds, pure foreign property (NFA), and domestic credit growth. These indicators were chosen due to the major components of monetary policy and their ability to capture the comprehensive economic environment that contains inflation. One of the most significant insights we have is that the broad money supply and inflation have a positive and favorable relationship. It has the impact of increasing inflation if M2 increases significantly without a comparable increase in goods and services. Considering all, this study supports the hypothesis that monetary policy has an average status on inflation in Bangladesh.