Modeling the Macro-Economy of Bangladesh

The study develops a parsimonious representation of the macro economy of Bangladesh. It aims to serve a dual purpose. First, it provides a framework for making rational and consistent predictions about Bangladesh's overall economic activity, the standard components of the balance of payments, the expenditure concepts of the national accounts, and the financial sector balances. Secondly, it offers a means of quantitatively evaluating the impact of alternative policy reforms on the economy, and assessing the feedback effects that changes in key macroeconomic variables of the economy produce in other sectors. The modeling procedure as sought to account for the structure of the Bangladesh economy, the availability of data, and the degree of stability of time-series estimates of parameters. The study was undertaken between July and October 2001. At the onset, discussions were held with government officials on macroeconomic policy and data availability, and documents and studies related to macroeconomic issues in Bangladesh were reviewed. Based on those data and reports, a macroeconomic model was formulated using Eviews software, and simulations with the model were linked to an Excel spreadsheet to facilitate its use.