Week- 3 Case study
Components of Multinational Environment- Bangladesh
Submitted by: Niraj Kharel
MBA 4th trimester
Bangladesh is emerging as a country capable of producing advanced products like pharmaceuticals, ships and electronics. The world’s eighth largest country in terms of population with approximately 160 million inhabitants will most likely remain heavily dependent on labor-intensive and export-oriented industries for the foreseeable future. However, this is only part of the picture, as an increasing number of companies today look on Bangladesh as a market with growing potential. There are of course still a number of challenges ...view middle of the document...
* It anchors inflation expectation of the markets is 7.5% in FY12 and the existing rate is10.17%. At present condition authority are unable to decrease the price of consumerproducts so it is wise to make the price stable by setting the inflation rate at 7.5%.
* It can achieve an inclusive economic growth by facilitating productive sectors whilekeeping inflationary pressure under control. By fixing inflationary rate the authoritytrying to increase the outcomes using the maximum infrastructure of the productivesectors which will contribute in the national income.
* It discourages credit flows to unproductive sectors whereas increasing credit flow toproductive sectors. As we all know by increasing dependence on domestic goods anddecreasing dependence on imported goods one country can go up to our expectations.
* It keeps domestic borrowing conditions easy in a recessionary global environment; the central bank has refrained from Reverse Repo operations since the last quarter of FY11 and has announced to continue it in the second half of the current fiscal year.
* It can strengthen its oversight on liquidity, capital adequacy and risk managementin banks and financial institutions to protect the domestic financial sector frominstabilities of the kind now afflicting markets in advanced economies.
These are the importance in which every central bank of a nation tries to attain by employing certain tools (Instruments) of a monetary policy. Let us now see objectives of monetary policy in detail:-
* Rapid Economic Growth: It is the most important objective of a monetary policy. The monetary policy can influence economic growth by controlling real interest rate and its resultant impact on the investment.
* Price Stability: The monetary policy having an objective of price stability tries to keep the value of moneystable. It helps in reducing the income and wealth inequalities.
* Exchange Rate Stability: Exchange rate is very volatile leading to frequent ups and downs in the exchange rate, theinternational community might lose confidence in our economy. The monetary policy aims atmaintaining the relative stability in the exchange rate.
* Balance of Payments (BOP) Equilibrium: The BB through its monetary policy tries to maintain equilibrium in the balance of payments.The BOP has two aspects i.e. the 'BOP Surplus' and the 'BOP Deficit'. If the monetary policysucceeds in maintaining monetary equilibrium, then the BOP equilibrium can be achieved.
* Full Employment: Full Employment' stands for a situation in which everybody who wants jobs get jobs.However it does not mean that there is a zero unemployment. In that senses the fullemployment is never full. Monetary policy can be used for achieving full employment. If themonetary policy is expansionary then credit supply can be encouraged. It could help increating more jobs in different sector of the economy.
* Neutrality of Money: The monetary policy should regulate the...