Determinants of Inflation in Bangladesh: An Empirical Investigation

Transcription

1 Deerminans of Inflaion in Bangladesh: An Empirical Invesigaion Kazi Mosafa Arif 1* Munshi Muroza Ali 2 1. Assisan Professor, Deparmen of Economics, Islamic Universiy, Kushia 7003, Bangladesh. 2. Assisan Professor, Deparmen of Poliics and Public Adminisraion, Islamic Universiy, Kushia 7003, Bangladesh. * of corresponding: arifeconomics@yahoo.com Absrac The sudy analyzed he major deerminans of inflaion in Bangladesh using daa for he period from 1978 o The sudy employed Johansen-Juselius coinegraion mehodology o es for he exisence of a long run relaionship beween he variables. The coinegraing regression considers only he long-run propery of he model, and does no deal wih he shor-run dynamics explicily. For his, he error correcion from he long run deerminans of inflaion is hen used as a dynamic model o esimae he shor run deerminans of inflaion. The sudy concluded ha he GDP, broad money, governmen expendiure and impor have a posiive effec on he inflaion in long run. On he oher hand, governmen revenue and expor have a negaive effec. The governmen expendiure coefficien is and he money supply coefficien is 0.337, implying a one percen increase in governmen expendiure and one percen increase in money supply elici 0.466% and 0.337% increase in inflaion respecively. In he shor-run money supply has been found o be major facor influencing inflaion in he counry. Key words: coinegraion, error correcion model, broad money. 1. Inroducion One of he mos enduring debaes in economics is wheher demand side facors (a consequence of increased economic aciviy) or supply side facors (due o increased cos) cause inflaion. Milon Friedman (1963) wroe Inflaion is always and everywhere a moneary phenomenon. The Quaniy Theory of Money leads us oo agree ha he growh in he quaniy of money is he primary deerminan of he inflaion rae. John Maynard Keynes (1936) argued ha demand deermines oupu, which, in urn, deermines employmen and prices. A full employmen of men and capial, excessive demand for goods and services drives up he general level of prices causing inflaion. High inflaion leads o decline in he purchasing power of nominal asses, such as money and wages. I is also argued ha inflaion brings wih i a lo of uncerainy abou fuure prices since no all he prices end o rise a he same rae. Therefore firms are having hard ime planning is fuure producion and how he paricular prices of is inpus and producion evolve relaive o oher prices (Dornbusch e al. 1996). Wih he vision o esablish Bangladesh as a middle-income counry by 2021, he bigges challenge in macro-economic managemen is reining he inflaion. The inflaion rae of Bangladesh in he las five years, saring from FY is above 6 percen and in 2010 is 8.44 percen, wih he non-food inflaion close o 5.37 percen and food inflaion percen. The gap beween he argeed GDP growh rae and he achieved GDP growh in he las weny years revealed ha increase in average inflaion may be one of he major reasons (Bangladesh Economic Updae, 2010). The recen inflaionary environmen in he counry may be due o boh demand side facors and supply side facors such as M2 growh, rade defici, increasing world food price and growh of governmen borrowing. Inernaional Food Policy Research Insiue (IFPRI) recenly published he Global Hunger Index (2010) in which Bangladesh finds is place in one of he lowes rank among he Souh Asian counries. Bangladesh is in he alarming posiion wih 24.2 score. The increased average inflaion is making he siuaion worse. Cauion is needed since higher inflaion may rigger inflaionary spirals beyond a safe level as implied by larger inflaion elasiciies. As Bruno (1995: 38) pus i, chronic inflaion ends o resemble smoking; once you ge he habi; i is very difficul o escape a worsening addicion. The objecive of his paper is o examine boh demand and supply side deerminans of inflaion in Bangladesh on he basis of empirical analysis. The res of he paper is organized as follows; secion 2 reviews he lieraure, secion 3 explains he model, daa and mehodological framework, secion 4 presens he es resuls; and secion 5 deals wih conclusions. 2. Lieraure Review There have been ample lieraures o examine he relaionship beween inflaion and is deerminans. Bu a few sudies are found on empirical analysis of inflaion and is deerminans in Bangladesh. This secion provides a summary of he findings from he previous lieraure. And also some relaed findings of oher counries will be 9

2 included here. Bangladesh Bank, IMF and CPD (2007) explored ha boh demand and supply side facors consiue he relevan sources of inflaion in Bangladesh. Among hese are M2 growh, privae secor credi growh, marke capializaion growh, growh of governmen borrowing, remiance growh, exchange rae change, marke syndicae. Taslim (1980) used regression models for explaining he inflaionary process of Bangladesh. He explored ha one year lagged money supply had significan posiive effec on inflaion. However, he inroducion of wage variable as an addiional independen variable resuled in dramaic fall of saisical significance of coefficiens of oher variables in he regression model. Anoher way, Khanam and Rahman (1995), examined he causaive facors of inflaion in Bangladesh during he period from o using Ordinary Leas Square (OLS) mehod. Their resuls showed ha growh rae of impor prices and money wages, boh considered as supply side variables, affec he inflaion posiively. They also found ha all demand side variables have insignifican influence on he rae of growh of prices. In an analyical wriing Ahmed and Das (2007) found ha world food price and fuel price riggered inflaionary pressure in Bangladesh. They also deeced inflaion ineria is anoher reason o susain higher inflaion. Kibria (2010) also raced here is a upward rend in inflaion as inernaional commodiy prices are showing signs of increase, excess liquidiy prevailing in he domesic marke, increased flow of remiance and is impac on Forex Reserve and sagnancy in invesmen in Bangladesh. Basir e al. (2011) raced deerminans of inflaion in Pakisan for he period from 1972 o 2010 using Johansen Co-inegraion and Vecor Error Correcion approached. The sudy carries ou long run as well as shor run esimaes of some facors influencing consumer price index (inflaion) in Pakisan. The resuls of he analysis reveal ha in he long run money supply, gross domesic produc, governmen expendiures and impors are conribued in raising consumer price index while consumer price index is bound o decrease due o higher governmen revenues. In he shor run, he coefficien of error correcion erm is suggesing 3 percen annual adjusmen owards long run equilibrium. Kim (2001) esimaed he deerminans of polish inflaion during , using coinegarion and error correcion models, idenified hree possible sources of inflaion namely, he moneary secor, he labor secor and he exernal secor. Laryea and Sumaila (2001) examined he major deerminans of inflaion boh in he long-run and shor-run in Tanzania using OLS mehod, ADF es for uni roo and error correcion model for he ime series daa from 1992 o 1998 on quarerly basis. The resul shows ha in he shor run, oupu and moneary facors are he main deerminans of inflaion. However, in he long run, he parallel exchange rae also plays a key role, in addiion o oupu and money. The posiive coefficiens on he exchange rae variable reflec he effec on inflaion via rade in goods, mainly hrough impors in he informal secor. Similarly, Abidemi and Maliq (2010) analyzed he dynamic and simulaneous iner-relaionship beween inflaion and is deerminans in Nigeria beween 1970 and The findings reveal ha growh rae of GDP, money supply, Impors, 1 s lag of inflaion and ineres rae give posiive impression on inflaion rae. While oher explanaory variables such as fiscal defici and exchange rae are indirecly associaed o inflaion. Saasiglu and Korap (2006) invesigaed he poenial causes of chronic-high inflaionary environmen in Turkish economy for he period using monhly observaions. The resuls obained suppor he view of cos-push or supply side facors such as exchange rae, wage indexaion mechanism and real ineres srucure in he economy seem o be he main causes of inflaionary process in Turkish economy, while demand-pull moneary facors have no been found indicaing consequenial effecs on inflaion. Khan e al. (2007) examined he main deerminans of recen inflaion rends in pakisan. Using daa from he o period, applying ordinary leas square mehod and verifying resuls hrough Breusch-Godfrey Serial Correlaion LM and Augmened Dickey-Fuller ess. The analysis concludes ha governmen secor borrowing, real demand, privae secor borrowing, impor prices, exchange rae, governmen axes, previous year consumer price index and whea suppor prices are found o have direc conribuion in consumer price index of Pakisan. Khahlan (2011) examined he deerminans of inflaion in Saudia Arabia for he period 1980 o 2009, boh in he long run as well as in he shor run, using coinegraion mehod developed by Pesaran e al. (2001). The resul shows ha inflaion in world economy, depreciaion of domesic currency and supply bolenecks are he major facors influencing inflaion in he long run. In he shor run, money supply and supply bolenecks have been found o be he major facors influencing inflaion in he counry. Shahadudheen(2012) analyzed he major deerminans of inflaion in India exracing 54 ime series quarerly observaions. The sudy employed Johansenjuselius coinegraion mehodology o es for he exisence of a long run relaionship beween he variables. The error correcion from he long run deerminans of inflaion is used as a dynamic model o esimae he shor run deerminans of inflaion. The sudy concluded ha he GDP and broad money have a posiive effec on he inflaion in long run. On he oher hand, ineres rae and exchange rae has a negaive effec. Mosayed and Mohammad (2009) examined he deerminans of inflaion in Iran for he daa from 1971 o The sudy adoped Auoregressive and disribued lag model (ARDL) and concluded ha money supply, exchange rae, gross domesic produc, change in domesic prices and foreign prices, a variable ha capure he effec of Iran or 10

3 Iraq war are he major deerminans of inflaion in Iran and all are posiively conribuing o he domesic prices in Iran. 3. Daa, Model and Mehodological Framework 3.1 The daa Annual daa from 1978 o 2010 were used o invesigae he relaionship beween Inflaion and is sources. The daa of all variables have been colleced from various issues of Bangladesh Economic Review. 3.2 The Economeric Model of Sources of Inflaion As he primary focus of his paper is o analyze he sources of inflaion, he economeric model is specified o faciliae he es of hypohesis ha wheher explanaory variables cause inflaion. Following Basir e al. (2011) we consider some imporan supply-side facors and demand-side facors for building he model as: INF 6 (1) 0 1M 2 2GDP 3GOVREV 4GOVEXP 5EXPORT IMPORT Where INF= CPI Inflaion based on 1996 prices M2= Broad money supply GDP= Gross Domesic Produc GOVREV= Governmen Revenue GOVEXP= Governmen Expendiure Expor= Expors of Goods and Services Impor= Impors of Goods and Services U i = Error erm Descripive saisics and correlaion marix of he variables of our seleced model are expressed in Table 1a and 1b respecively. Table 1a EXPORT GDP GOVEXP GOVREV IMPORT INFLATION M2 Mean Median Maximum Minimum Sd. Dev Skewness Kurosis Jarque-Bera Probabiliy Sum Sum Sq. Dev. 6.79E E E E E E+08 Observaions Table 1 b EXPORT GDP GOVEXP GOVREV IMPORT INFLATION M2 EXPORT 1 GDP GOVEXP GOVREV IMPORT INFLATION M u i 3.3 Mehodological Background The main objecive of he sudy is o explore he links beween inflaion and is deerminans in Bangladesh. To see he shor-run and long-run relaionship in he models uni roo res, co-inegraion es and error correcion mehod will be used. A saionary ime series is one whose basic properies do no change over ime, while a non saionary variable has some sor of upward or downward rend. Mos of he economic variables exhibi a non- 11

4 saionary rend. If variables are non-saionary hen i will inflae R-square and he score, in his condiion regression known as spurious regression means he resuls become meaningless. If a ime series has a uni roo (non-saionary), he firs difference of such ime series will be saionary. The Augmened Dickey-Fuller (ADF) uni roo es is used o examine he saionariy of he daa se. The ADF es is based on following regression: y y p Y (2) 1 j j j1 Where α is consan, is a linear ime rend, β, δ and γ j are slope coefficiens, ε is he error erm. The null hypohesis of non-saionary series could be wrien as: H 0 : β = 0. On he oher hand, he one-sided alernaive hypohesis of saionary series could be expressed as: H 1 : β < 0. Once value for he es saisic is compued i can be compared o he criical value for he Dickey-Fuller Tes (MacKinnon, 1991). If he es saisic is less han he criical value, hen he null hypohesis of γ=0 is rejeced and no uni roo is presen. Oherwise, he alernaive hypohesis is acceped, ha is uni roo is presen. If he variable is differenced once and he differenced series is saionary, hen i is inegraed of order one [i.e., I (1)]. Similarly, if i is differenced wice and he differenced is saionary, hen i is inegraed of order wo [i.e., I (2)] and so on. Johansen coinegraion es is used o es he long-run movemen of he variables. As Engle and Granger (1987) poined ou, only variables wih he same order of inegraion could be esed for coinegraion. Therefore, boh variables are examined for coinegraion. Only variables wih he same order of inegraion can be esed for heir coinegraion. A sandard es Johansen coinegraion es is used o check he long-run movemen of he variables (Johansen 1988; Johansen 1991). The es is based on he maximum likelihood esimaion of he K- dimensional Vecor Auoregression (VAR) of order p: y A y Ap y p Bx (3) 1 1 where y is a k-vecor of non-saionary I(1) variables, x is a d-vecor of deerminisic variables (such as a consan, or a consan and ime rend ec.) and ε is a vecor of errors (innovaions). We use he Trace (Tr) eigenvalue saisic and Maximum (L-max) eigenvalue saisic (Johansen 1988; Johansen and Juselius 1990). The race es evaluaes he null hypohesis ha here are r or less coinegraing vecors agains he alernaive hypohesis ha here are more han r. This es is expressed by T ln(1 ˆ ) (4) Tr = ir1 Where, T is he number of usable observaions, and he λ 1,s are he esimaed eigenvalue from he marix.the maximal eigenvalue es assesses he null hypohesis ha here are exacly r coinegraing vecor agains he alernaive hypohesis ha here is r+1. The maximal eigenvalue es uses he (r+1) eigenvalue and is given by L max T ln(1 ) r1 (5) ir1 If race eigenvalue es and maximum eignevalue es yield differen resuls, he resuls of he maximum eigenvalue es should be used because he power of he maximum eigenvalue es is considered greaer han he power of he race eigenvalue es (Johansen and Juselius 1990). The order of VAR, p, in he error-correcion model was chosen by minimizing he Akaike s informaion crierion. According o Granger (1988), if he variables are inegraed of order I(1) and are coinegraed, hen here mus exis a leas one way causaion. If he variables are coinegraed, he exisence of an error-correcion represenaion may ake he following form: r s ix i jy j ECT 1 i1 i1 p q bi y i c jx j dect 1 i1 i1 x u (6) y a v where ECM explains he error-correcion mechanism erm. This ECM -1 is he one period lagged value of he esimaed error of he coinegraing regression obained from OLS (Ordinary Leas Squares) esimaion. The logic behind his model is ha generally a long-run equilibrium relaionship beween wo economic variables exiss. Bu, in he shor run here can be disequilibrium. Therefore, he error correcion mechanism correcs a proporion of disequilibrium in he nex period. So, he error correcion process is an insrumen of reconciling shor-run and long-run behavior. In he error correcion model, β i /b i & γ j /c j are he shor-run dynamic coefficiens and δ is he long-run coefficien, u & v are whie-noise residuals. The absolue value of δ deermines how quickly he equilibrium is resored. Conversely, in he absence of coinegraion, a vecor auoregression (VAR) needs o be consruced using firs differences of he variables. (7) 12

5 4. Tes Resuls The empirical resuls of he es are encouraging. They are discussed as below. Before conducing ess for coinegraion and causaliy, he saionariy properies of he variables have been checked by using Augmened Dickey-Fuller (ADF) uni roo es. To deermine he order inegraion of ime series, uni roo es is applied on level as well as on firs difference. The able-2 shows he resuls of ADF uni roo es. Table 2: ADF Tes Resul Variables Level Firs Difference Consan & Trend Resul Consan & Trend Resul Inflaion I(1) I(0) M I(0) I(0) GDP I(1) I(0) Expor I(1) I(0) Impor I(1) I(0) Gov. Revenue I(1) I(0) Gov. Expendiure (1) I(0) Noe: Mackinnon (1991) criical value for rejecion of hypohesis of uni roo applied. The repored resul in able reveals ha he hypohesis of a uni roo can be rejeced in all variables in levels. However, he hypohesis of a uni roo is rejeced in firs differences a 0.05 level of significan which indicaes ha all variables are inegraed of degree one, I (1). Tha means all he variables achieve saionariy only afer firs difference. The esimaion of he equaion by direc OLS gives he following resuls: Table 3: Esimaion of he model Dependen Variable: INFLATION Mehod: Leas Squares Sample: Variable Coefficien Sd. Error -Saisic Prob. EXPORT GDP GOVEXP GOVREV IMPORT M C R-squared Mean dependen var Adjused R-squared S.D. dependen var S.E. of regression Akaike info crierion Sum squared resid Schwarz crierion Log likelihood Hannan-Quinn crier F-saisic Durbin-Wason sa Prob(F-saisic) The findings of he esimaed equaion are as follows: The resuls reveal ha money supply, GDP and impor are found o be direcly relaed o he price level in case of Bangladesh. The coefficien having posiive sign is significan suggesing ha 1 percen increase in money supply leads o 0.03 percen increase in consumer price index on he average in he long run. The resul is according o macroeconomic phenomenon of classical economiss given in quaniy heory of money as increase in money supply leads o higher price levels. Due o higher money supply, more funds will be available o inves in he economy, invesmen will be aken place, more employmen will be generaed, aggregae demand will increase, and finally here will be increase in consumer price index. I affecs price level hrough demand side. GDP is inducing consumer price index a 1 percen level of significance implying ha consumer price index will increase by percen due o 1 percen increase in gross domesic produc on he average in he long run. In he same manner, if impors of goods and services will be raised by 1 percen, price level will increase by percen on he average in he long run. Wih regards o governmen revenue, governmen expendiure and expor i is having inverse effecs on consumer price index. 13

6 4.1 Johanson Co-inegraion Resul The nex sep in our empirical analysis is o es for coinegraion. Since he variables are considered o be I (1). Table 4: Co-inegraion Resul Unresriced Coinegraion Rank Tes (Trace) Hypohesized Trace 0.05 No. of CE(s) Eigenvalue Saisic Criical Value Prob.** None * A mos 1 * A mos A mos A mos A mos A mos Unresriced Coinegraion Rank Tes (Maximum Eigenvalue) Hypohesized Max-Eigen 0.05 No. of CE(s) Eigenvalue Saisic Criical Value Prob.** None * A mos A mos A mos A mos A mos A mos i. r refers o he number of coinegraing equaion. ii. The es has been conduced assuming linear deerminisic rend. iii. * denoes rejecion of he hypohesis a he 0.05 level. **MacKinnon-Haug-Michelis (1999) p- values have been used for his purpose. A 5 per cen significance level, he race es indicaes 2 coinegraing equaions while he maximum eigenvalue es indicaes 1 coinegraing equaion among he variables. As he maximum eigenvalue es is usually preferred for rying o pin down he number of coinegraing vecors (Enders 2004), we conclude ha here is 1 coinegraing equaion among he variables based on his es. Normalized coinegraing coefficiens (sandard error in parenheses) INFLATION EXPORT GDP GOVEXP GOVREV IMPORT M ( ) ( ) ( ) ( ) ( ) ( ) The normalized coinegraion equaion is depiced in above able which reveals ha he GDP, governmen expendiure, impor and money supply have a posiive effec on inflaion. On he oher hand, expor and governmen revenue have a negaive. The GDP coefficien is 0.014, implying ha in Bangladesh; a one percen increase in GDP while ohers keep consan conribues 0.014% increase in inflaion. The governmen expendiure coefficien is 0.466, implying a one percen increase in governmen expendiure riggers 0.466% increase in inflaion. One percen increase in impor leads o a 0.089% increase in inflaion. Similarly he money supply (M2) coefficien is and showing significan, implying ha in Bangladesh, one percen increase in money supply leads o a 0.337% increase in price level. Expor and governmen carries expeced negaive and significan coefficien. By specifying he long run deerminans of inflaion in an error correcion model, he shor run as well as he long run effecs of all righ hand side variables in equaion are esimaed in one sep, which is a major advanage ha error correcion modeling has in comparison o oher esimaion. Table 5: Error Correcion Model Error Correcion: D(INFLATION) D(EXPORT) D(GDP) D(GOVEXP) D(GOVREV) D(IMPORT) D(M2) CoinEq Sandard Error ( ) ( ) ( ) ( ) ( ) ( ) ( ) saisics [ ] [ ] [ ] [ ] [ ] [ ] [ ] 14

7 Table-5 shows he speed of adjusmen coefficiens which reveals ha only one variable is adjusing. The adjusmen coefficiens on coinegraion equaion 1 for all variables are negaive excep money supply. The empirical sudy is performed by using PC version of Eviews Conclusions In his paper, we have examined he effecs of some facors on inflaion in Bangladesh by means of coinegraion and error correcion mehods using yearly daa for a period of 33 years. The resuls of he analysis reveal ha in he long run money supply, governmen expendiures, gross domesic produc and impors are conribued in raising consumer price index while consumer price index is bound o decrease due o higher governmen revenues, and higher expors. In he shor run, he coefficien of error correcion erm is suggesing 4 percen annual adjusmen owards long run equilibrium. Governmen expendiure and money supply (M2) have more posiive effec on inflaion han GDP and impor. The governmen expendiure coefficien is and he money supply coefficien is 0.337, implying a one percen increase in governmen expendiure and one percen increase in money supply rigger 0.466% and 0.337% increase in inflaion respecively. On he basis of he findings of he sudy, i does conclude ha inflaion in Bangladesh is riggered by boh demand side facors as well as supply side facors bu governmen expendiure and money supply are criical. The policy implicaion is ha in Bangladesh o lessen inflaion momenum he governmen will have o pursue a moneary and fiscal policy which maches wih he acual scenario of real secors and moneary secors. I is srongly experienced ha furher sudy should be carried ou using differen ses of variables and appropriae mahemaical models o deec he inflaion deerminans in Bangladesh. References: Abidemi, O. I. and Maliq, S. A. A. (2010) Analysis of Inflaion and is deerminan in Nigeria. Pakisan Journal of Social Sciences, 7(2), Bangladesh. Ahmed, Nasiruddin and Das, N. K. (2007) An Invesigaion ino he Recen Inflaionary Trends in Bangladesh. Dhaka: Finance Division, Minisry of Finance. Bangladesh Bank (2007) Inflaion in Bangladesh: The Evidence and he Policy Alernaives, Inflaion in Bangladesh. CIRDAP Audiorium 19 Augus 2007, Dhaka. Bangladesh Economic Review, Finance Division, Minisry of Finance, Governmen of Bangladesh, Various Issues. Bangladesh. Cenre for Policy Dialogue (2007) Price of Daily Essenials: A Diagnosic Sudy of Recen Trends. Dhaka: Minisry of Commerce. Basir, F., Nawaz, S., Yasin, K., Khursheed, U., Khan, J. and Qureshi, M. J. (2011) Deerminans of Inflaion in Pakisan: An Economeric Analysis using Johansen Co-inegraion Approach. Ausralian Journal of business and Managemen Research, 1(5), Bruno, M. (1995) Does high inflaion really lower growh?. Finance and Developmen, vol. 32, Dornbusch, R., S. Fischer and C. Kearney (1996) Macroeconomics. Sydney: The Mc-Graw-Hill Companies, Inc. Enders, W. (2004) Applied Economeric Time Series, 2nd ed., John Wiley & Sons, Inc. Engle, R. F. and Granger, C. W. J. (1987) Co-inegraion and Error Correcion: Represenaion, Esimaion, and Tesing. Economerica, 55, Friedman, Milon (1963) Inflaion: Causes and Consequences. New York: Asia Publishing House. Inernaional Food Policy Research Insiue (2010). hp:// Inernaional Moneary Fund, 2007, Bangladesh: Seleced Issues (IMF Counry Repor No. 07/230, June 2007), pp Johansen, S. (1988) Saisical Analysis of Coinegraing Vecors. Journal of Economic Dynamics and Conrol, 12, Johansen, S. (1991) Esimaion and Hypohesis Tesing of Coinegraion Vecors in Gaussian Vecor Auoregressive Models. Economerica, 59(6) Johansen, S. and Juselius, K. (1990) Maximum Likelihood Esimaion and Inferences on Coinegraion wih applicaions o he demand for money. Oxford Bullein of Economics and Saisics, 52, Keynes, John Maynard (1936) The General Theory of Employmen, Ineres and Money. London: Macmillan (reprined 2007). Kim, Byung-Yeon, Deerminans of Inflaion in Poland: A Srucural Coinegraion Approach (December 18, 2001). BOFIT Discussion Paper No. 16/2001. Available a SSRN: hp://ssrn.com/absrac= or hp://dx.doi.org/ /ssrn Khan, A. A., Bukhari, S. K. H. and Ahmad, Q. M. (2007) Deerminans of Recen Inflaion in Pakisan. Munich Personal RePEc Archive (MPRA), paper no ,

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9 Annex able 1: Daa Shee Real GDP is calculaed a consan marke prices, while he base year for CPI inflaion is , i.e., = 100. Govrev = Governmen revenue Govexp = Governmen expendiure Excep Inflaion all variables are shown in Crore Taka( Local currency) Inflaion M2 GDP Impor Expor Govrev Govexp