Central Banking and Monetary Policy in Muslim-Majority Countries
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Central Banking and Monetary Policy in Muslim-Majority Countries

Akhand Akhtar Hossain

This book reviews key aspects of central banking and monetary policy in selected Muslim-majority countries. While reviewing country-specific experiences and issues in inflation and monetary policy, and analysing them from an historical context, emphasis is given to the evolution of Islamic banking and finance and the consequent institutional developments for maintaining price stability. One recurring theme is that, although Islamic banking and finance may have created some complexities, it remains consistent with Classical monetary theory and has created opportunities for improving the infrastructure of central banks and monetary policy to maintain both price and economic stability. The introduction of Islamic banking and finance strengthens the argument for low and stable inflation and rule-based monetary policy. Monetary policy frameworks in these countries include exchange-rate pegging, monetary targeting and inflation targeting under varied restrictions on capital flows. Macroeconomic problems under these regimes are also highlighted and their policy implications drawn.
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Chapter 3: Bangladesh

Akhand Akhtar Hossain


Bangladesh has recovered impressively from the dire economic-political straits that overtook it in the early to mid 1970s. It has gained macroeconomic stability and, since the early 1990s, sustained economic growth of about 5.5 per cent per annum. Consequently, per capita income has more than doubled over this period. Integral to this transformation has been structural change in the economy that, characterized as agricultural until the mid 1980s, now boasts a significant light secondary industry sector. Being a densely populated country of about 165 million, Bangladesh has welcomed a steady decline in its population growth rate to, currently, around 1.5 per cent per annum. This has enabled per capita income to increase at a rate of about 4 per cent per annum over the period 1991–2012. With other factors, this has contributed to a steady decline in the incidence of poverty, as measured by the headcount index, from 61 per cent to 35 per cent over this period. The challenge for Bangladesh is to sustain its moderately rapid economic growth, at least at the present level, so as to drive the incidence of poverty even lower. Poverty incidence below 20 per cent is attainable in something more than a decade at the present trend rate of economic growth. While its recent socio-economic development is impressive, it is a matter of particular concern that income inequality, having reached a nadir in the late 1990s, has resurged since the early 2000s.

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