Beyond symmetry: investigating the asymmetric impact of exchange rate misalignment on economic growth dynamics in Bangladesh

ABSTRACT

This study examines the influences of asymmetry in exchange rate misalignment on economic growth of Bangladesh using utilizing time series data over the period from 1980 to 2020. The outcomes of the study symmetrically show that exchange rate misalignment has a significant impact on economic growth. In contrast, the adoption of NARDL technique gives substantial evidence for asymmetric effects, revealing that undervaluation supports economic growth while overvaluation hampers it. This analysis supports implementing a market-based equilibrium exchange rate system. It informs the regulators, policy makers, and market specialists that the customized exchange rate policies support sustained long-term economic growth.

KEYWORDS:

• Exchange rates
• economic growth
• Hodrick-Prescott filter
• Hamilton filter
• asymmetry
• Bangladesh

JEL CLASSIFICATION:

• F31
• F43
• F63

Disclosure statement

No potential conflict of interest was reported by the author(s).

Author’s contributions

All authors have contributed to the manuscript equally.

Data availability statement

All the data is available in the manuscript. And the datasets used and/or analysed during the current study are available from the corresponding author on request.

Notes

1. The choice of the time frame is driven by the availability of comprehensive data, especially considering the COVID-19 pandemic, which led to a lack of data for many variables in 2021 and 2022. Therefore, spanning from 1980 to 2020 ensures consistency and reliability in the dataset, facilitating a thorough analysis despite the data gaps caused by the recent global health crisis.

2. Keep in mind that after normalization happens, we will have, $\widehat{{\beta }_1}=\frac{\rho { }_1}{-\mathit{\rho }{ }_0},\widehat{{\beta }_2}=\frac{\rho { }_2}{-\mathit{\rho }{ }_0},\widehat{{\beta }_3}=\frac{\rho { }_3}{-\mathit{\rho }{ }_0},\text{break}\widehat{{\beta }_4}=\frac{\rho { }_4}{-\mathit{\rho }{ }_0},\widehat{{\beta }_5}=\frac{\rho { }_5}{-\mathit{\rho }{ }_0},\widehat{{\beta }_6}=\frac{\rho { }_6}{-\mathit{\rho }{ }_0},\widehat{{\beta }_7}=\frac{\rho { }_7}{-\mathit{\rho }{ }_0},$

Additional information

Notes on contributors

Javed Iqbal

Javed Iqbal is working as a professor at Quaid-i-Azam University, Islamabad, Pakistan. Before joining Quaid Azam University, Javed Iqbal worked in various mainstream economic ministries such as the Ministry of Planning, Ministry of Economic Affairs, and Ministry of Finance. Dr. Javed Iqbal has supervised 40 MPhil research theses and two Ph.D. theses, and he currently supervises 5 Ph.D. scholars. He has over 40 research papers published in national and international journals such as Applied Economics, Economic Change and Restructuring, Economic Analysis and Policy, International Trade Journal, and Global Economy Journal.

Misbah Nosheen

Misbah Nosheen has worked as an Associate Professor in the Department of Economics at Hazara University in Pakistan since 2008. She has been the Chairperson of the Department of Economics since 2016. Her research interests include international economics, econometrics, and environmental economics. She has supervised 50 MPhil theses and has four Ph.D. theses to her credit. She has over 40 research articles published in national and international journals such as Applied Economics, Economic Change and Restructuring, Economic Analysis and Policy, International Trade Journal, Energy Reports, Environmental Management, Development, and Sustainability.

Sareer Ahmed

Sareer Ahmad is a Ph.D. student at the School of Economics, Quaid-I-Azam University, Islamabad, Pakistan. With a robust research background, he has authored over 20 research articles in different journals like Energy Economics, economics Bulletin, Real Estate review, Helion, Macroeconomics and finance in emerging market Economies, cogent Economics and Finance. His research interests are in the fields of international economics and development economics. He is also working as a Teaching Assistant at the Directorate of Students Affairs, Quaid-I-Azam University, Islamabad.

Nikhil Chandra Shil

Nikhil Chandra Shil is currently working at the Department of Business Administration, East West University, Bangladesh as Professor. He is a member of different professional accounting organizations like the Institute of Cost and Management Accountants of Bangladesh, Chartered Institute of Management Accountants, Chartered Global Management Accountants, and Chartered Institute of Public Finance and Accountancy etc. Dr. Shil does research in Economic Development and Growth, Public Finance, Corporate Governance, Environmental Economics and Accounting, Management Accounting and Control Systems, etc.