Bangladeshi monetary policy transmission mechanism: asymmetric responses, inflation, and policy time lags

This study empirically documented that the Bangladeshi inflation converts to its long-run threshold faster when it is above than when it is below the endogenously determined threshold. Furthermore, the estimation results reveal the unidirectional Granger causality from the real GDP growth rate to the countercyclical monetary policy, i.e., the real GDP growth rate is weakly exogenous from the Bangladeshi countercyclical monetary policy actions. These findings indicate that even though the Bangladeshi Central Bank uses its monetary policy to manage the macro economy, money and hence monetary policy seem not to matter in the short run.