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Purpose– Inflation and its related uncertainty can impose costs on real economic output in any economy. This paper aims to analyze the relationship between inflation and inflation uncertainty in India.Design/methodology/approach– The methodology uses a generalized autoregressive conditional heteroscedasticity (GARCH) model and Granger Causality test.Findings– Initial estimates show the inflation rate to be a stationary process. The maximum likelihood estimates from the GARCH model reveal strong support for the presence of a positive relationship between the level of inflation and its uncertainty. The Granger causality results indicate a feedback between inflation and uncertainty.Research limitations/implications– The research results have important implication for policy makers and especially the Reserve Bank of India.Practical implications– It provides strong support to the notion of an opportunistic central bank in India.Originality/value– The results of the paper are of relevance not only to the monetary policy makers but also to academicians in India and other developing countries.

Over the course of the last decade, Bangladesh has implemented a broad-based program of financial and market reforms, encompassing changes in the structure of the financial system, prudential and supervisory frameworks, and monetary management. This paper estimates a savings function to evaluate the impact of various determinants of private savings in Bangladesh—with special emphasis on the impact of financial reform. The results show that the level of income, real interest rates, and the share of agriculture in GDP have a positive impact on the savings rate. Dependency rate and public savings rate, on the other hand, have a negative impact on private savings. Interestingly, the financial reform index has a negative impact on private savings. Hence reforms that were initiated since the late 1980s had actually reduced savings. An explanation for this result can be traced to the state of the banking sector beginning as early as 1972. Political interference dominated the selection of bank management and loan portfolios. Loans were extended to institutions and individuals with high credit risks leading to a high default rate. Moreover, the high proportion of effectively nonperforming assets also contributed to high interest margins and relatively low degree of financial intermediation. Despite a number of positive changes that have been introduced in the financial sector following reforms, these factors have adversely affected private savings in the economy. The pace of reform has not kept in line with the severity of the situation and further reforms in a timely fashion are necessary.

The paper explores the stockastic behaviour of the Dhaka Stock Exchange (DSE). It notes that relative small size of the stock market and the limited number of market participants will constrain the impact of the market on economic growth in Bangladesh. The statistical examination indicates that the relative development impact of the DSE can be increased by reducing market imperfections and increasing their allocable efficiency. (DÜI-Sen)

The purpose of this article is to investigate the causal relationship between economic growth and defense spending in fifty-five developing countries. Granger-causality tests are employed to analyze the presence and direction of causality between these two variables. Moreover, the study focuses upon the appropriate representation of the nature of nonstationarities apparent in these two economic time series across different countries. The results suggest that the relationship between defense spending and economic growth cannot be generalized across countries. The actual relationship may vary from one country to another due to the use of a different sample period, as well as differences in the socioeconomic structure and type of government in each country.

The authors discuss briefly the relative impact of monetary and fiscal policy decisions on economic activities in Bangladesh by using a modified St. Louis equation proposed by Ali F. Darrat. The regression results suggest that growth in government expenditure has a greater impact on changes in nominal income than growth in M1. (DÜI-Sen)