Economic Structure and Macroeconomic Uncertainty: Policy Implications for Bangladesh

Bangladesh Development Research Working Paper No. 20

24 Pages Posted: 10 Jan 2014

See all articles by Bernhard G. Gunter

Bernhard G. Gunter

Bangladesh Development Research Center (BDRC); American University - Department of Economics

Faisal Ahmed

International Monetary Fund (IMF) - African Department

A. F. M. Ataur Rahman

North South University

Jesmin Rahman

International Monetary Fund (IMF)

Date Written: January 9, 2014

Abstract

This paper begins with examining Bangladesh’s economic structural transformation during 1980-2010, which is compared and contrasted with the transformation of India and Pakistan. It then calculates and compares the three countries’ macroeconomic volatility and uncertainty for the observation period (1980-2010), using unbiased volatility and uncertainty measures. It also reviews the evolution of Bangladesh’s macroeconomic uncertainty for each decade (i.e., the 1980s, 1990s and the 2000s). It shows, for example, that Bangladesh’s GDP volatility and uncertainty have been increasing over time. Reflecting on the fact that macroeconomic uncertainty has a negative impact on investment and growth, the paper derives various policy implications for Bangladesh, highlighting the importance of economic diversification, countercyclical monetary policy, smoothing external factors, and building up reserves and buffers.

Keywords: structural change, development, volatility, uncertainty, Bangladesh, India, Pakistan

JEL Classification: O11, O14, O53

Suggested Citation

Gunter, Bernhard G. and Ahmed, Faisal and Rahman, A. F. M. Ataur and Rahman, Jesmin, Economic Structure and Macroeconomic Uncertainty: Policy Implications for Bangladesh (January 9, 2014). Bangladesh Development Research Working Paper No. 20. Available at SSRN: https://ssrn.com/abstract=2377006 or http://dx.doi.org/10.2139/ssrn.2377006

Bernhard G. Gunter (Contact Author)

Bangladesh Development Research Center (BDRC) ( email )

2508 Fowler Street
Falls Church, VA 22046-2012
United States

American University - Department of Economics ( email )

4400 Massachusetts Avenue, N.W.
Washington, DC 20016-8029
United States

HOME PAGE: http://www.american.edu/cas/faculty/gunter.cfm

Faisal Ahmed

International Monetary Fund (IMF) - African Department ( email )

1700 19th Street, NW
Washington, DC 20431
United States

A. F. M. Ataur Rahman

North South University ( email )

Professor, Department of Economics
Bashundhara R/A
Dhaka, 1229
Bangladesh

HOME PAGE: http://www.northsouth.edu/

Jesmin Rahman

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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