DETERMINANTS AND STABILITY OF MONEY SUPPLY IN BANGLADESH: AN EMPIRICAL INVESTIGATION

The money supply is an essential full-scale financial variable which basic for better administration of the fiscal area of the nation. This study fills the existing research gap in money supply analysis in Bangladesh by using advanced econometric tools like causality tests and error-correction models in addition to stationarity and co-integration tests with the most recent data. Throughout the years, the increase in money supply is associated with an increase in real GDP, rate of inflation, rate of interest, and depreciation of exchange rate. This paper investigates the causal nexus between broad money supply and other macro-economic variables. ADF and PhillipsPerron test has been carried out to check the stationarity of the variables. The entire model has been found as co-integrated using the Johansen-Juselius test for cointegration. A normality test has also been carried out. Besides, the Granger causality test has been applied to examine the causal relationship among broad money supply and other macro-economic variables. Reverse causation from broad money supply to both real GDP and the rate of inflation has been found