Nexus Between Inflation Rates and Institutional Rigidities in Bangladesh: An Overlooked Aspect for the Cause of Inflation

In this study, we argue that institutional rigidities contribute to the inflation rates in Bangladesh. Using annual data covering the period 1982-2005 and incorporating three new measures of institutional rigidities, we estimate an inflation model by ARDL and OLS techniques. The results do confirm our prediction that higher degree of institutional rigidities leads to higher inflation rate in Bangladesh. Evidence also suggests that inflation is unlikely to be "monetary phenomenon" in Bangladesh. The results are reliable and robust to the inclusion of alternative measures of institution, money supply, real economic activities, and estimation techniques.