Impact of Inflation on Import: An Empirical Study
International Journal of Economics, Finance and Management Sciences
Volume 1, Issue 6, December 2013, Pages: 299-309
Received: Sep. 19, 2013; Published: Nov. 10, 2013
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Author
Md. Ariful Islam, BASIC Bank Limited, Khulna, Bangladesh
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Abstract
Inflation is associated with rising price. It is a situation in which there is a sustained, inordinate (excessive), and general increase in prices. The increase in prices must last for a reasonable period of time. If prices go up during this period and fall in the next, then it is mere price fluctuation. The increase in price must be excessive by that country's experience. Inflation is the rise in average price of all goods that we buy and not just of one item. After analyzing the trend of inflation rate, number of L/C and value of L/C opened in Prime Bank Limited, Khulna Branch in the last five years, it is seen that there is a minimum or very insignificant correlation between inflation and import trade. Theoretically, there is a positive correlation between domestic inflation and import. This study also shows a positive correlation, but the correlation is very insignificant. Obviously, there are some reasons behind this insignificance. We should remember that, inflation is not the only factor that can affect the import trade. There are many other factors that can influence the import trade of a country. In case of Bangladesh, the reasons are the massive pressure on the demand of goods available, exchange rate fluctuation, huge population, frequent natural disasters of Bangladesh, different government policies, relationship with the exporting country, inflation rate of the exporting country etc. As so many factors are influencing the import of a country, that’s why inflation cannot create a huge pressure on the import.
Keywords
Inflation, Import, Letter of Credit, Exchange Rate, Consumer goods, Trade, GDP
To cite this article
Md. Ariful Islam, Impact of Inflation on Import: An Empirical Study, International Journal of Economics, Finance and Management Sciences. Vol. 1, No. 6, 2013, pp. 299-309. doi: 10.11648/j.ijefm.20130106.16
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