IJSRP, Volume 7, Issue 1, January 2017 Edition [ISSN 2250-3153]
Md. Shawkatul Islam Aziz, Mudabber Ahmed
Inflation is one of the major problems of the economy of Bangladesh. The study analyzed the key determinants of inflation in Bangladesh using data for the period from 1987 to 2012. To explain the relationships a model is constructed with lagged independent variables and Ordinary Least Square (OLS) method has been used. Empirical results show that money supply and unemployment positively and significantly affect inflation. Results also indicate that exchange rate significantly and negatively influences over inflation rate. The explanatory variables accounted for 77 percent of the variation of inflation during the study period. This study suggests that money supply should be controlled to decrease inflation. Exchange rate is also an important tool to control inflation. A depreciation in the exchange rate raises inflation.