THE CAUSAL RELATIONSHIP BETWEEN OIL PRICE AND INFLATION IN BANGLADESH: AN EMPIRICAL ANALYSIS
Date
2022-12
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Research Supervisor
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THE CAUSAL RELATIONSHIP BETWEEN OIL PRICE AND INFLATION IN BANGLADESH: AN EMPIRICAL ANALYSIS
Volume
Vol13
Issue
1
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Volume Title
Abstract
Bangladesh is one of the fastest growing developing economies in the South Asian region with very little fossil fuel endowment. As a result, the country typically relies on imported energy sources. Existing media reports point out an increase in global energy prices in recent years. An increase in global oil price simultaneously increases the rate of inflation in the oil importing countries as well. Hence, the aim of this paper is to empirically analyze the short-run and long- run causal relationship between oil price in the international market and domestic inflation in Bangladesh. Using annual data ranging from 1980 to 2021, the paper conducts a Johansen's cointegration test to identify the variables' cointegrating relationship. Moreover, Granger Causality and VECM causality tests confirm a unidirectional causality runs from oil price in the international market to domestic inflation in Bangladesh. both in the short run and in the long run.
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North South University