Bangladeshi Real Exchange Rates and Compettitive Positions in Export Markets Relative to the two Asian Largest Countries

Abstract

An exchange rate system is important for a country to maintain economic stability. The objective of this study is to calculate the real exchange rate between Bangladeshi taka-Chinese renminbi and taka-Indian rupee to analyze the Bangladeshi competitive positions in the bilateral export markets with her two largest trading partners in Asia. Empirical results suggest that the Bangladeshi inflation rate is relatively higher than that in the People’s Republic of China but relatively lower than inflation rate in India, particularly since 2009. However, takarenminbi and taka-rupee real exchange rates were consistent with the predictions by the Purchasing Power Parity theory, whereby reserving Bangladesh’s relative competitive positions in export markets with the two largest Asian economies over a period during which many extraordinary events—political, economic, and otherwise—occurred both in Asia and throughout the world.