Murdoch University Research Repository

Welcome to the Murdoch University Research Repository

The Murdoch University Research Repository is an open access digital collection of research
created by Murdoch University staff, researchers and postgraduate students.

Learn more

Dynamics of financial development in co-integrated Eerror Correction Mechanism (ECM): Evidence from Bangladesh

Ali, M.M. and Hassan, A.F.M.K. (2008) Dynamics of financial development in co-integrated Eerror Correction Mechanism (ECM): Evidence from Bangladesh. Studies in Business and Economics, 14 (2). pp. 5-23.

PDF - Published Version
Download (237kB)


This paper examines the factors that determine the level of financial development in Bangladesh. Three indicators of financial development are used as dependent variables: broad money, private credit and total bank liability-all percentage of Dross Domestic Product (GDP). Interest rate differential, trade openness, inflation, and exchange rate are included in the regression model as explanatory variables. Dependent and independent variables are found cointegrated and their short run adjustments are also found statistically significant. Among the variables, only interest rate differential is found insignificant. Inflation and exchange rate affect the level of financial development significantly irrespective of indicator selected. Trade openness significantly affects financial development when broad money and private credit indicators are used, but in case of bank liability it is found insignificant. The m- paper also examines the impact of financial sector reform program (FSRP) initiated in on financial development. The study finds that FSRP negatively affects financial development. The policy prescriptions that follow from the findings are to maintain inflation at a low level .and increase the integration of the economy wuh rest of the world

Item Type: Journal Article
Publisher: College of Business and Economics, Qatar University
Item Control Page Item Control Page


Downloads per month over past year