THE IMPACT OF KEY MACROECONOMIC FACTORS ON THE ECONOMIC GROWTH OF BANGLADESH: AN AUTO REGRESSIVE DISTRIBUTED LAG BOUNDS TESTING APPROACH

Abstract

Economic growth is a foremost factor in determining the well-being of the people in a country. This study analyzes the impact of key macroeconomic factors on economic growth of Bangladesh from the period of 1990 to 2020. The aim of the study is to examine the long run and short run relationship between the economic growth and various macroeconomic variable by using Auto Regressive Distributed Lag (ARDL) model. The widely-used Akaike Information Criterion (AIC) is used for the selection of lag length of the model. The result of the ARDL model shows that inflation rate, exchange rate and trade openness have positive and significant impact on Bangladesh economic growth while foreign direct investment has insignificant impact on economic growth of Bangladesh. As the country’s GDP is increasing, it is more productive which leads to more people being employed. This increases the wealth of the country. Economic growth also helps to improve the standards of living and reduce poverty, but these improvements cannot occur without economic development.