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Showing posts with the label Understand Macro

Economics: Study of Choices

In our daily lives we make number of choices. Some of these choices are monetary meaning these choices involve money and some of these choices are non monetary meaning they don't involve money. All these choices are driven by some factors. How we value the things we do, things we consume, stuffs we possess, the relationships we maintain. What we inherently desire in a given point in time dictate the choices we make. But that's the half story. These choices are also dictated by the limitations we have. The salary we get from our job, the family size - people who depend on us or the people we depend on, inheritance if any, the order of the society and many more put a ceiling on our wishes. Economics take both sides of the coin in consideration. The wishes we have and the limitations imposed on us influence our economic activity. So, in short, economics is the study of choices.  When we go out for shopping, we have a list of items in our wish list. Items on this wish list yield di

Bangladesh Economy: Understanding the Relationship among Key Macro Variables

Arrival of the pandemic and the following monetary stance have shifted some key macro variables to the extreme. One of the major windfalls of the pandemic for Bangladesh economy is remittance. Restriction of cross border movement shut the illegal remittance market (e.g. hundi). As a result, remittance in the book grew significantly posting 50-60% YoY (Year over Year) growth for the last few months. Some other factors may have played some role too in this regard, but this one is thought to be the most significant one. With the falling import and moderate export growth, remittance turned out to be a significant driver towards the swelling BoP surplus. This gives the central bank, Bangladesh Bank, a lot of flexibility in conducting expansionary monetary stance to support the economy in its critical time. We are observing a time when there is ample liquidity in the financial system, BoP surplus growing, interest rate falling and inflation remaining at comfortable range. I wil

Understanding Interest Rate in Bangladesh Market

Here I will be trying to connect the dots to see where things can be placed and how some events were unfolded. Now, I will tell you to consider it as a drill where I will be trying to refresh my own thoughts and understanding. In the future I want to look back and see what I missed and why I missed them. I will keep it as a story moving in a linear time. I am considering the timeline when I have actively followed the market. In retrospect, everything seems to connect but back then I couldn’t quite gauge the extent of everything that was about to be followed. Probably, in some cases, I did understand the direction the market was following but my personal investing strategy would tell you otherwise. There were lots of biases in place and more importantly I was someone who just started out and was confronting all the emotional roller coaster I put myself in. I am still figuring out ways to stick to my strategy and tackling the emotional upheaval I face every now and then depending on how

Why Interest Rate Control Failed in Kenya

Kenya is healing from an unintended setback erupted from violation of the law of economy. Government of Kenya’s attempt to control interest rate backfired as economy drifted towards slow lane due to slower private sector credit growth and reduced signalling effects of monetary policy. Kenya is learning and so are many economies from their policy failures. In this video I dig into the causes and effects of interest rate controls and it’s inevitability of failure. I took help from IMF’s working paper titled “Do Interest Rate Controls Work? Evidence from Kenya” and some other articles on the topic. In October 2019, Kenya’s parliament repealed its cap on lending rate as majority went with president’s refusal to keep the cap intact. It finally makes way for central bank of Kenya to play an active role in the Economy after being in the hibernation for three years. This case of capping lending rate far below from the existing market rate is a prime example where Economy falls a